Banks are encouraged “not only to formally identify the clients”, but to study their business.
The construction sector of the Russian economy is the only one that, according to Rosstat, did not come out of the prolonged recession after 2014, the risk of another blow from the financial authorities. The Bank of Russia recommends banks to make adjustments in the AML / CFT procedures and actively apply them to construction companies, which along with wholesale and retail trade, and organizations to provide services “most often” engaged in operations “found in the shadow area of the budget funds, state corporations and the real sector of the economy.”
This is stated in the letter that the banks received from the main Department of the Central Bank of the Russian Federation in the Central Federal district in the end of last week.
Funds in the informal sector displays companies that perform various contract work (e.g., developers and companies working with government contracts).
To evade the close attention of banks and regulators, they “often advance payment of taxes (especially VAT) and support them with an adequate structure”, and questionable transactions “less focused on technology companies, gradually flowing into the firm, leading to the real economic activity”, according to the Central Bank of the Russian Federation. Receiving funds from customers to firms relocating it to counterparties with signs of technical companies, who immediately direct them to the cashing or withdrawal abroad, said the Central Bank.
In this regard, banks are encouraged “not only to formally identify the clients, but to study their business and their business counterparties” using “all available sources” including the press and the Internet. “Credit institutions should try to identify at the earliest stage possible negative aspects in the activities of the customer” and encourage them to cease the suspicious transaction, calls CB. The gain control should work since 2019.
Since the first quarter, the Central Bank will start to consider how effectively the banks identify and stop these suspicious transactions when assessing the quality of work of internal control service, the letter said. Earlier, the Russian banks began to seek their clients confirmation transactions for small amounts. If the person does not provide justification for the transfer, the card can cancel.
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