Regulator’s recommendations to add to identification of illegal financial operations via retail outlets

Bank of Russia Bulletin No. 112 (1708), dated 9 December 2015, publishes the methodological recommendations to credit institutions on staying alert to their clients’ certain operations.

In its recommendation the regulator states that the volume of money laundering through bank accounts is on decline, but at the same time some alternative schemes are being used, in particular, with the involvement of retail outlets.

According to such schemes, retailer’s sale proceeds from sales of foodstuffs, cars or construction materials go to some third party who ‘ordered’ cash money rather than being sent to such retailer’s bank accounts. Such third party ‘pays’ for the cash by transferring money to retailer’s payment accounts through numerous transit operations. Typically, such settlements are based on contracts of service, loan agreements, claim reassignments, brokerage contracts, in other words, on all those documents where VAT payments are omitted.

The Bank of Russia believes that such operations result not only in tax evasion but on legalisation (laundering) of criminally obtained incomes and other illegal accomplishments.

The Bank of Russia recommends that credit institutions with retailers’ active accounts should take some measures to prove their decency as regards financial operations. If no cash gets on retailer’s accounts with regular flows of non-cash payments, the regulator explains the procedure to verify financial operations and recommends how a bank should treat such client in compliance with legislation in force.