International Financial Crime: Russia's Efforts

Meeting with Head of the Federal Financial Monitoring Service Yury Chikhanchin

Money laundering, Ponzi Schemes, financial fraud of all types, Dark Web financing of terrorists, and more cross the desk of the head of the Federal Financial Monitoring Service Yury Chikhanchin. But as with many other important international organizations, Russia finds itself on the outside due to illegal sanctions. Russia has found a way to continue its efforts as well as a unique way to educate Russians about this criminal activity so first of all they won’t become a victim and second they can help catch the criminals, which is in the form of an annual international Olympiad that took place last October with Putin taking part in its plenary session. Many trillions of dollars in financial crime have occurred just this century thanks to the rise of Neoliberalism and the vast increase in the use of terrorism by NATO and the Outlaw US Empire. Dr. Hudson has remarked on this point more than once; here he is from the must read transcript of the podcast he had with his associate Bill Black:

Well, there’s a difference in how lawyers look at this and how economists look at it. And Bill has explained the corruption and the falsification. I never saw any fraud at Chase Manhattan Bank. You remember when President Nixon said, When the President does it, it’s not a crime. Well, the real control fraud for me is the economic theory is a fraud. The law itself is a fraud. In 1967, when I was at Chase, I was handed a note from the State Department saying, We’re looking at a way to finance the Vietnam War, and we think we’ve got it. We want to make America the new Switzerland. We want to make America the haven for criminals and kleptocrats and crooked presidents throughout the world. If we become to the new Switzerland and get all of this criminal money, we’ll be able to balance the international payments and we won’t have to sell our gold when we go to war in Vietnam. So what they asked me was how much money goes into Switzerland from the criminal agents. I was their balance of payments economist. So my job was to see, first of all, I had to estimate how much drug trade fraud and crime there was according to the FBI reports on criminal income.

What do dictators, where do they put their money? Well, they put it in London and they put it in the offshore banking centers. So they asked Chase and Citibank and other US banks to set up branches in the Cayman Islands and other banking centers so that they could use these centers to receive this criminal money. And as you remember, HSBC even redesigned where you make the deposits in the bank so they’d be big enough to take huge wraps of $100 bills. And my job was to see how much fraud money was there available and criminal money was there in the world to balance the international payments. Well, that wasn’t a crime. David Rockefeller always said that he wanted to do the right thing. When the treasury asked him to set up these banking centers, he agreed, just like the other banks did. In fact, if you look at the US Treasury bulletin, every three months they have a report of bank liabilities to foreigners, including bank liabilities to their foreign branches, and they list France and England. But every three months it’s the little countries, the Caribbean countries. And this whole idea of offshore banking centers where you put your money and you don’t have to pay taxes, you don’t have to declare it.

I don’t think there’s going to be any solution to this, to defraudulize it, because it was started by the oil industry in the 1920s when they set up Liberia and Panama as a anti states with their own currency so that they could take their oil earnings from Saudi Arabia and Iran and other countries, put them in Liberia or Panama using the US dollars so that there’s no foreign exchange risk, and they had no income tax, and then they would then send the money to the United States. And not many people know that all of Standard oil’s income was made in Liberia and Panama. And that was explained to me by their financial manager when I was doing my study of the balance of payments of the oil industry. So there you have fraud built into the law. And if you’re going to be a crook, you want to build it into the law.

And there’s more after that excerpt. The French Lawyer-economist Bastiat wrote 170 years ago about men manipulating the law to make their illegal behaviors legal. Clearly, part of the issue is agreeing on what’s legal and what’s illegal, but that’s precisely what the Outlaw US Empire doesn’t want as it desires to be able to alter the rules at a whim whenever it suits its interests. What’s discussed below doesn’t get to the above level of criminality, and now you get to read:

Vladimir Putin: Yuri Anatolyevich, good afternoon!

You are welcome.

Yu.: I would like to report on how the national anti-money laundering system works in the modern period.

Vladimir Putin: Please.

Yu.Chikhanchin: A few points. What is happening on the international platform? On the platform, the FATF is an intergovernmental organization that deals with issues related to countering money laundering and terrorist financing.

Our activities have been suspended, and we are only allowed to work in the regional Eurasian group, which also includes China, India, the Central Asian republics, and Belarus. And the opponents are taking steps to completely exclude us from the FATF and include us in the "black lists". But we are working together with ministries and departments. We still manage to prove that this is a technical platform, and the Russian Federation meets all the standards from the point of view of the national anti-money laundering system.

A similar situation is developing on the second international platform – the Egmont Group, which unites financial intelligence agencies in about 170 countries. There is also an attempt to exclude it, but the countries still do not make this decision. We were suspended from our membership and disconnected from the Egmont network, which does not allow us to receive the requested information online.

But we are looking for other options, channels. Moreover, at the time of the suspension, we worked with more than 50 countries, conducted almost 700 financial investigations and about 230 criminal cases.

Therefore, such an action, in our opinion, is only for the benefit of the criminal world. Moreover, we are now conducting materials with the FSB, where Russian citizens and foreigners have created a so-called call center, and under the guise of charity in one of the European countries, more than a hundred people received money fraudulently. We made a request to this country – no responses – twice already. And we understand that such an action is only in the hands of criminals. But we continue working anyway.

In October, 2015, the CIS heads of state signed an agreement on the establishment of an International Risk Assessment Center. It's already working. Together with our colleagues from the CIS countries, we analyzed all criminal cases and identified the countries where the criminals were withdrawing money, banks, and counterparties. And today we are working on these countries, we have already opened several dozen financial investigations, and this is working.

But this analysis allowed us to identify the countries and banks of increased attention, to bring them to ministries and departments and to strategic enterprises, so that they take this into account as risks. Here you can see [in the presentation], the dynamics are just right-the decline has gone sharply with these countries, with these banks.

Of course, our opponents ask questions that our anti-money laundering system is ineffective, and they are deeply mistaken here, I can say with confidence. Indeed, in 2022, we had some problems when sanctions were imposed on Russian banks, and some of our clients were transferred to small, small and regional banks.

A lot of work has been done here together with the Central Bank, and today we can say that financial institutions and financial organizations in the country are quite law-abiding, about 90 percent of them are law-abiding. With ten percent, we continue to work. And this created mechanism allowed only this year to prevent about 320 billion rubles from entering the shadow turnover. This is due to joint actions with the Central Bank and the fact that they have created a "Know your Customer"mechanism together with us.

To date, 10 shadow sites with a turnover of 28 billion rubles have been eliminated and about one and a half thousand criminal cases have been initiated – or are being worked on – together with the Ministry of Internal Affairs, the FSB and the Investigative Committee. 11 billion rubles have already been collected to the budget.

Work is underway to prevent fraud in the financial markets – these are primarily pseudo-brokers, financial pyramids. And here are two features. The first feature is that almost all of them are located in the Internet space. It is very difficult to identify them, but we are working on them. And the second is the involvement of a large number of so-called drops, who voluntarily transfer their installation data for conducting shadow schemes for a small fee. And when people don't know, they just buy it. Growth tripled this year.

But the most unpleasant thing is that a lot of young people have appeared, and participating in such schemes, they break their lives and credit history. In other words, it will be difficult for them to open bank accounts, get loans, and so on. But together with law enforcement agencies, 14 financial pyramids were first stopped, 380 criminal cases were initiated against the organizers and participants of these transactions, and two billion rubles were seized.

And one more mechanism began to work well. Last time I reported to you that there were attempts to involve the courts.

Vladimir Putin: And illegal collection of money through the courts?

Yu.Chikhanchin: Yes, they present fictitious documents. Today, the methodology with the courts has been worked out, and this year they have not allowed 94 billion rubles to enter the shadow market. That is very good news…

Vladimir Putin: In other words, they didn't let me take the money, in fact.

Yu.Chikhanchin: Yes.

Work continues on the turnover of cryptocurrencies. Taking into account the fact that the system is not fully regulated, there is an increase in suspicious transactions by about two times. And this is mainly due to drugs, fraud and corruption.

Vladimir Putin: Money laundering from drug sales?

Yu.Chikhanchin: Yes. And, unfortunately, terrorism also uses it here.

But thanks to the software product that you approved, together with VTB Bank, we launched a so – called transparent blockchain-it allows us to still conduct investigations in these cases related to cryptocurrency. Moreover, about seven thousand law enforcement officers and other interested agencies are now connected to this transparent blockchain. And we have already connected six countries, so they are also using it. This makes it possible to initiate criminal cases.

I would like to say a few words about our work related to the budget. Thank you for supporting the so-called treasury banking support at the time. This allows us to keep somewhere over one and a half million different contracts under monitoring.

Vladimir Putin: For the amount?

Yu.Chikhanchin: The amount is about 6.5 trillion rubles, which is what we are tracking.

As a result, we managed to get results together with the Bank of Russia and law enforcement agencies. In particular, illegal trade procedures with the FAS were stopped for almost 30 billion rubles, budget funds were also saved for 30 billion rubles, and criminal cases were initiated jointly with the Ministry of Internal Affairs, the FSB, and the Investigative Committee on the budget alone – about a thousand cases. And about 190 billion rubles have already been reimbursed to the budget.

From the point of view of efficiency, together with the Central Bank and the Tax Service, we managed to reduce cashing out, such a phenomenon, by 20 percent with budget funds and the use of one-day firms by about 10 percent.

Similar work is being carried out on the state Budget, and 6.5 billion rubles have already been saved this year alone. I must say that the mechanisms are running, they give their meaning, and there are fewer and fewer crimes in GOZ. But most importantly, we have managed to reduce overdue accounts receivable.

Vladimir Putin: Before the Defense Ministry?

Yu.Chikhanchin: Yes. Together with the Ministry of Defense, the Prosecutor General's Office, and the FSB, the dynamics are shown here [in the presentation]. Since 2020, it has been reduced by three times, and this year alone 43 contracts were closed – for a total of 50 billion rubles.

We continue to work in new regions, and this treasury banking support has also been launched here: in total, we control almost 1.7 trillion rubles in turnover and about a hundred different funds that provide recovery assistance.

We are working closely with [Marat] Khusnullin's team and the commission. As a result, embezzlement in the amount of about 14.5 billion rubles has already been prevented, and criminal cases have been initiated.

We are continuing to work, or rather, we have started to work, within the framework of your Decree on the mandatory sale of foreign currency by Russian exporters, where we are actively working together with the Government, with the Ministry of Finance, with the Ministry of Economic Development and with the currency control authorities represented by the [Central] Bank.

What did we manage to do? First of all, First Deputy Prime Minister [Andrey] Belousov is coordinating. We have already created a personal account for working with exporters, the procedure for interaction of authorized representatives has been defined, the Decree defines authorized representatives with exporters, the methodology for [monitoring] the mandatory sale of currency is working, and monitoring parameters have been defined. In other words, all "head owners" and subsidiaries, including non-residents, are highlighted. And we set up an anti-money laundering system for monitoring foreign currency earnings. All banks are identified. I must say that in general, we have done a great job.

Vladimir Putin: Has the number of banks increased now?

Yu.Chikhanchin: Yes, there are about 300 banks today.

We do a lot of work with exporters, we meet constantly, thanks to the Russian Union of Industrialists and Entrepreneurs and [Alexander] Shokhin, we meet together. In general, I must say that all exporters have the right understanding. There are some nuances, we have already come to the materials, to the investigation, but this is a working mechanism. Your decree on additional numbers has been signed. We will launch all of this.

We are working on improving financial literacy and financial security. A committee on the Olympiad [on financial security] has been set up here together with the Government, and [Dmitry] Chernyshenko is the head of the Government.The Ministry of Education and the Ministry of Education primarily help us, of course, our International Training Center, financial institutions – the Financial University, RUDN University first of all, and MEPhI. This year's Olympiad brought together 19 countries. You took part [in the plenary session].

Vladimir Putin: Six million people [coverage of the Olympic Movement]?

Yu.Chikhanchin: Yes.

Vladimir Putin: It's unbelievable. This is a large number of people.

Yu.Chikhanchin: Yes. These are financial security lessons. But also 19 countries. And today we have applications from 25 countries for the next Olympiad.

But also the initiative that the Brazilian student Augusto proposed, Augusto's initiative, is the creation of an international movement, and we are currently working on it. I'll show you later.

We have launched an information and communication training platform for schoolchildren and students, which Promsvyazbank created for us on your behalf. Thank you very much for this.

We are doing similar work not only with students and schoolchildren, but also launched the same project "New Generation" together with Rossotrudnichestvo, but for employees of financial intelligence agencies. We have united seven countries, and other countries are already asking us to do the same. This is how the work is organized.

Vladimir Putin: Thank you.

Here’s how the Kremlin describes the International Financial Security Olympiad mentioned up top:

The International Financial Security Olympiad has been held annually since 2021 on the initiative of Rosfinmonitoring. The competition is attended by high school students and students, this year more than 500 students from 19 countries reached the final. In addition to individual tasks, the final stage program includes meetings with invited experts and potential employers, master classes, panel discussions, excursions and sports competitions.

I reported on this event soon after it occurred, but it didn’t get the average amount of attention as other postings, perhaps because of poor editorial choice for the title, “For High Schoolers” when the topic concerns everyone. Since Putin just declared 2024 to be the Year of the Family in Russia, there’s a short excerpt that relates to that:

Yury Chikhanchin: Mr. President, during the Olympiad we held several polls, including in this room, and one of the questions was: what is the most valuable thing in your life? Surprisingly, 91.8 percent said "family." I doubt that in some European country such an answer would have sounded….

Putin: You know, first of all, I want to take under the protection of our friends – and we have a lot of friends in Europe as well, because, yes, people who believe that traditional values, including family values, have died; they behave very aggressively, especially in North America, in Europe. But people who share our views, there are quite a lot of them in European countries, I would say, a lot. They just keep a low profile and don't show their position. Therefore, I would not divide anyone here, but, on the contrary, I would try to unite everyone on our platform.

There was no way to avoid the politicization of the Family Values issue. Perhaps Russia will use it like the West has used Ukraine. Yes, the term will need to be defined. Russia isn’t alone in legislating values into law. Russia’s humanitarian policy was recently provided and it has much to say on the matter. Crime has no place in normative family values, and there’re many types of crime.

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