How to conduct KYC on Russian Counterparties ?
Doing business with Russian entities in non-sanctioned sectors of the economy requires some specific attention points regarding client due diligence (the risk exposure assessment process of clients to money laundering and terrorist financing).
Russia complies with their national AML/CTF laws and implements the assessments out of supranational reports. The Russian law and its accompanying acts are similar to what the 4th European AML Directive (EU 2015/849) prescribes.
Moreover, through the membership in the FATF, the Eurasian Group and the Council of Europe Committee of Experts on the evaluation of AML measures and the Financing of Terrorism, Russia indicates the common goal to combat AML and financing of terrorism. Recently, on 13 November 2017, the adoption of the beneficial owners disclosing procedure had been published. A clear understanding of some basic principles will allow you to strengthen your processes. In Russia there are three main types of companies:
How to establish a company in Russia?
Establishing a company in Russia will start similarly to a company settlement in Belgium with the signing of a charter. In this charter, most of the basic principles on how the company will be organised will be written down. A copy of this document will allow an in-depth analysis of the corporate structure.
Partially state-owned companies have no different legal setup. The state will be one of the (primary) shareholders at that moment. There are some specific state companies, but for the operation of governmental or municipal assets, the Russian state will use the so-called unitary state enterprises. The Russian Post is an excellent example of a unitary state enterprise.
What are Russian Customer Due Diligence requirements?
Under the new 4th AML Directive, the CEO and CFO are required to be identified (part of the executive board). The supervisory board will need to be identified as well (if they own (in)directly more that 25% of the shares).
Nevertheless, we have to keep in mind that based on Transparency International's corruption index, Belgium is ranked 15 out of 176 countries and that Russia is positioned 131. (See Transparency Index). The burden of regulatory compliance is getting stronger in an interconnected environment. Getting a view on the different aspects can be a benefit to the understanding of your professional relationships.
