Concluding remarks
Money-laundering in the Russian Federation is
closely intertwined with the wide-ranging political,
economic and social processes under way in the country.
It has become an identifiable feature of contemporary
capitalism in the Russian Federation. It exploded when
market reforms, including financial liberalization,
privatization and many others were undertaken. It
followed the destruction of the old public institutions
which, in many cases, were not replaced. Moneylaundering in the Russian Federation feeds on the
perceived decline in the strength of the State and the
weakening of its law enforcement institutions. It is linked
to the loss of jobs and huge shadow economy. Economic
instability and crime are among the reasons for the
shadow capital and its flight from the Russian Federation.
Money-laundering has gained a significant international
dimension and has become a problem not only for the
Russian Federation but also for the international
community.
Effective measures against money-laundering in the
Russian Federation necessitate the consideration of the
whole process of reforms, particularly the requirement to
build regulatory and institutional capacities for the
functioning markets.
It includes improvements in banking
supervision which increasingly needs to be coordinated
with the law enforcement efforts. Banking supervision in
the Russian Federation cannot be limited to the traditional
methods used to ensure the prudence of financial
operations, as it has become critical to join efforts to
eradicate illegality and criminality in the banking sector.
In today’s Russian Federation, it is hard to expect
fast actions and fast results in the combat against moneylaundering. It is a long process that requires coherent
national and international efforts. Fighting moneylaundering and economic crime in the Russian Federation
means addressing a set of wide-ranging problems. The
privatization dilemma inevitably surfaces in any thorough
attempts to overhaul the criminal situation. The dilemma
implies rethinking and reconsideration of the outcomes of
the privatization process—an issue very sensitive and
dangerous politically and economically. Embarking on a
crusade against powerful moguls continues to face the
risk of becoming a fruitless undertaking. Changing the
way of thinking of people who have begun accepting
lawlessness, the shadow economy and tax evasion as a
part of their lives is acknowledged to be a lengthy and
gradual process. Russians, faced with economic
hardships, are receptive to the policies that promise
immediate financial gains. Despite the dangers of the
amnesty and/or legalization proposal, many in the
Russian Federation are attracted to its features, such as
the possibility of quick recovery of some assets without
fatal political clashes and economic downturn. The policy
of legalization might contribute to the aggravation of the
criminal situation and further delay any effective actions
against money-laundering.
Money-laundering in the Russian Federation so far
has been an issue related to the proceeds of crime,
primarily of economic crime, or of economic and
financial operations, which could not be immediately
classified as criminal. Millions of Russians think that the
1990s evidenced massive, unpunished theft of public
assets and their concealment abroad. This massive theft
and concealment draws attention to the situation and
inspires calls for action. Russian society is receptive to
the idea of capturing criminals and punishing them
appropriately. However, the idea looks even more
attractive to them if it is linked with the possibilities for
using the assets seized to solve social problems.
Increasing poverty and joblessness make it a compelling
task to produce immediate financial gains as a result of
the anti-money-laundering drive. The gains are expected
to demonstrate success of the law enforcement efforts and
help to address pressing social problems, including
escalating poverty. The Russian authorities plead for
international facilities and assistance in returning to the
Russian Federation assets seized in other countries. This
measure might eventually contribute to the anti-money-
22
Russian capitalism and money-laundering
laundering drive and sentiment more than any other
action.
Condemnation of money-laundering per se as a
criminal act is yet to gain ground among Russians.
Standard anti-money-laundering actions, such as the
adoption of laws on money-laundering and related
guidelines for law enforcement agencies or banking
regulations, are yet to be absorbed, accepted and utilized.
Actions in these directions have been often regarded not
only as low-priority measures, but also as practically
impossible to implement. Meagre capacities and the
tainted reputation of the law enforcement agencies or the
close association of banks with scams and fraud have
often served as examples of a dismal reality.
Those charged with fighting money-laundering not
only lack knowledge of the specific aspects of the
legislation or techniques used in the analysis of data or in
investigations. They also need opportunities to learn and
compare experiences in setting up the overall anti-moneylaundering framework and to choose the features that are
expected to work in the conditions of the Russian
Federation. This has been one of the undertakings of the
Russian Interministerial Centre for Countering the
Legalization of Illicit Proceeds, the institution mandated
to address the money-laundering problem. During its
short existence, the Centre has already demonstrated itself
as an institution with competencies for policy
development, research, international cooperation and
investigation of money-laundering cases. This specialized
institution, as well as others charged with combating
money-laundering, require support and encouragement if
one expects faster outcomes in the fight against that
phenomenon.
Notes
1 See Shazeeda (1998) for a brief discussion of the
argument.
2 In 1999, the international media extensively reported
about the investigations by law enforcement officials of
the United States of America of transfers of as much as
$10 billion of Russian money through the Bank of New
York. Some of the money appeared to have come from
Russian organized crime bosses and has been described
as a part of a money-laundering scheme to conceal the
origin of criminal profits.
3 Average of different estimates of capital flight in
Abalkin (1998),
p. 425.
4 Some examples of the inflow of the criminal monies into
the Russian Federation from the United States during the
early stages of privatization (1992-1994) are mentioned
in Fituni (1998).
5 Rossiiskaya Gazeta, 29 December 1998, quoted in
Lopashenko (1999), p. 8.
6 Leonid Abalkin is the director of the Institute of
Economics of the Russian Academy of Sciences.
7 Abalkin (1999), p. 425.
8 International Monetary Fund (1999), p.104.
9 Shuttle traders are individuals who travel abroad to
purchase and bring back to the Russian Federation
commodities and sell them at home at a profit. They use
the local currency obtained to purchase foreign cash and
use it to travel again abroad and bring more goods with
them. 10 Fituni (1999), p. 362.
11 More on that in the later part of this paper.
12 China’s capital flight estimates from Gunter (1996).
13 Rushailo (1999), p. 23.
14 From the interview with Viktor Melnikov, VicePresident of the Central Bank of the Russian Federation.
Moskovskii Komsomolets (2000). 15 From the statement by Yelena Ishchenko, director of the
Foreign Exchange Department of the Russian Central
Bank, reported by Radio Free Europe, 12 June 2000. 16 Russian Economic Trends (1997-1999).
17 The Central Bank of the Russian Federation has been
using this definition since 1998. 18 Central Bank of the Russian Federation (2000).
19 Buchs (1998) estimated that the amount of cash entering
the Russian Federation annually was $25-40 billion
(equal to 10 per cent of GDP) and, accordingly, the
dollarization rate was 42 per cent. 20 Mentioned in Chegodaev (1999).
21 The dollarization debate is about costs and benefits of
dollarization. For example, full dollarization of the
economy is discussed as a way of enabling developing
countries to overcome monetary and exchange rate
instability. More on that in Berg and Borensztein (2000)
and in Calvo and Reinhart (1999).
22 Silverman and Yanovich (2000), p. 152.
23 Argued, for example, by Fituni (1999).
24 Discussed in Schleifer and Tresiman (1998).
25 IMF (1999), pp. 125-127.
26 For example, in 1999, in the Russian town of Volgograd,
the regional bureau against organized crime finally was
able to locate and arrest Mr. Aleksandr Fatyanov, who
illegally acquired a promissory note for 2 million roubles
from a Volgograd enterprise. Before that, in October and
November 1999, the local court of Mr. Fatyanov’s home
town Krasnoyarsk and its regional prosecutors’ office
both issued warrants for his arrest based on two separate
criminal investigations for fraud and embezzlement. At
the same time, when the Krasnoyarsk’s investigators
were trying to locate Mr. Fatyanov, he was managing in
another town, Volgograd, the regional office of the
Federal Centre for Arrears of the Russian Federation. He
was nominated as its head on 28 July 1999, after being
recommended as the best-qualified candidate by the
Federal Centre for Arrears, an agency that is expected to
solve high-priority problems of arrears and nonpayments among local industries and offices. Izvestiya,
7 February 2000.
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