With plans to launch its own cryptocurrency later this year, Russia has updated its anti-bribery and AML laws to aid its burgeoning digital economy while dealing with corruption risks associated with the new technology amid reports the Federal Security Service (FSB) allegedly tried to extract a bribe worth $1 million in bitcoin from a media mogul last year.
At the end of 2019, the Russian Supreme Court made it clear that “digital rights” — a term used to mean cryptocurrencies in the country’s law — can be used to facilitate illegal activities such as bribes, in the same way as fiat currency, property and other valuable assets. The court stated that such cryptocurrency bribes should be valued by experts at the time of the bribe.
However, Russian government officials and their family members would only need to disclose their illicit cryptocurrency income when they are exchanged for traditional money as “Other Income,” according to a 2018 guidance issued by the Russian Labor Ministry.
The FSB was also allegedly involved in the disappearance of $450 million in cryptocurrency from Wex, one of the world’s largest online exchanges. Wex was an offshoot of BTC-e, a Bulgaria-based cryptocurrency exchange that allegedly handled bitcoin traced to the Russian military intelligence hacking unit.
BTC-e was eventually shut down in 2017, in a first of its kind multi-jurisdictional synchronized law enforcement operation by the U.S. Treasury Department Financial Crimes Enforcement Network (FINCEN) for laundering $4 billion in cryptocurrencies.
Last year, the Russian Supreme Court ruled cryptocurrency theft was a declared a criminal offense paving the way for new regulations. The court further directed the country’s central bank (CBR) to make amendments covering cryptocurrencies to the AML laws.
On February 17, 2020, the new amendments were published. The regulatory update broadly categorizes any cryptocurrency-linked transaction as a potential money laundering risk, such accounts might fall into the category of performing “dubious transactions.”
Additionally, and perhaps most importantly, the new amendments specifically mention crypto-assets in the criteria for freezing accounts.
Last month, the CBR and the FSB also imposed a ban on using cryptocurrencies as a payment method. In an effort to de-anonymize all cryptocurrency users, the regulation does allow for cryptocurrency-to-ruble exchanges at financial institutions.
With the new amendments, Russia becomes the latest in a string of countries that have put the brakes on the promotion of financial services tied to cryptocurrencies while still exploring ways to develop a Fintech solutions.