Following only some of the money in Russia

Demokratizatsiya

Volumn 17, Issue 1, 2009, Pages 41-70

  Burger, Ethan ^a  

^a GEORGETOWN UNIVERSITY LAW CENTER   (United States)

Author keywords

Anti money laundering systems; Corruption; Currency control; Financial Action Task Force; Financial crime; Flight capital; Money laundering; RosFinMonitoring

Indexed keywords

BANKING; CORRUPTION; CRIME; CURRENCY MARKET; LAW ENFORCEMENT; LEGISLATIVE IMPLEMENTATION;

EURASIA; RUSSIAN FEDERATION;

EID: 70350367880     PISSN: 10746846     EISSN: None     Source Type: Journal    
DOI: 10.3200/DEMO.17.1.41-72     Document Type: Article

References (193)

1. For more on RosFinMonitoring, see RosFinMonitoring, "Federal Financing Monitoring Service," RosFinMonitoring, http://www.fedsfm.ru/eng/ (accessed October 5, 2008).
2. United Nations Office on Drugs and Crime, "Money Laundering," UNODC-United Nations Office on Drugs and Crime, http://www.unodc.un.or.th/money- laundering/ (accessed October 10, 2008).
3. For a discussion of the different stages of money laundering, see Peter Reuter and Edwin M. Truman, Chasing Dirty Money: The Fight against Money Laundering (Washington, DC: Institute for International Economics, 2004).
4. Most countries' financial intelligence units are members of the "Egmont Group," which was formed in 1995 and is an "informal international gathering of financial intelligence units," including RosFinMonitoring. "The Egmont Group," Egmont Group, http://www.egmontgroup.org/ (accessed October 10, 2008).
5. Law on Hard Currency Regulation and Control, Law of the Russian Federation (as amended), No. 3615-1, October 9,1992. Originally, this law retained many features of Soviet currency regulation, particularly in the areas of the movement of currency values (substitutes for money like stocks, bonds, and promissory notes) across international lines, the opening of foreign bank accounts, the acquisition of foreign currency, and the mandatory sale of hard currency earned to the state. Over time, this law has been frequently amended to reflect many modern banking practices.
6. Ethan S. Burger and Louise Shelley, "Russia Finally Adopts a Law to Combat Money Laundering," Russia/Central Europe Executive Guide, October 31, 2001, 9.
7. See "The Criminal Code ofthe Russian Federation, no. 63-FZ," June 13,1996, art. 1,2,http:// www.legislationline.org/download/action/download/ id/1697/file/0cc 1 acff 8241216090943e97d5b 4.htm/preview (accessed November 10, 2008).
8. For example, in 1999, Russia hosted a G-8 Conference in St. Petersburg at which it agreed to follow the recommendations of the Financial Action Task Force on Money Laundering (FATF)-the leading organization dedicated to combating organized crime and money laundering. "Ministerial Conference ofthe G-8 Countries on Combating Transnational Organized Crime (Moscow, October 19-20,1999): Communique," U.S. Department of Justice, http://www.usdoj.gov/ criminal/cybercrime/ g82004/99MoscowCommunique.pdf (accessed February 3, 2009), especially no. 24-42.
9. Russia also became a party to the United Nations Convention against Transnational Organized Crime in New York in November 2000. United Nations Office on Drugs and Crime, "U.N. Convention against Organized Crime," UNODC-United Nations Office on Drugs and Crime, http://www .unodc.org/unodc/en/ treaties/CTOC/countrylist.html (accessed October 20, 2008).
10. Russia also has AML obligations arising from its membership in the Council for Europe. Council of Europe, "MOLI-RU 2: Project against Money Laundering and Terrorist Financing in the Russian Federation," Action against Economic Crime, http://www.coe.int/t/dg1/legalcooperation/ economiccrime/moneylaundering/Projects/MOLI%20RU-2/moliru2-en.asp (accessed November 10, 2008).
11. Money laundering can be understood as "the conversion of criminal income into assets that cannot be traced back to the underlying crime." Reuter and Truman, Chasing Dirty Money, 1.
12. "Russian Govt Wants Big Cuts in Banks-Sources," Prime-Tass, October 1, 2008.
13. The Financial Times quotes an anonymous Western economist as saying: "By summer, Russia is going to be in very serious trouble."
14. Catherine Belton and Stefan Wagstyl, "Battle Erupts over Budget Crisis," Financial Times, February 6, 2009.
15. "Russian Govt Wants Big Cuts in Banks."
16. Ibid. It is worth noting that RCB chair Sergey Ignatiev is also chairperson of Sberbank.
17. "Russian Govt Wants Big Cuts in Banks."
18. "Central Bank Goes Gangbusters against Third of All Bank Licenses," SKRIN Market & Corporate News, September 9, 2008.
19. "Russian Central Bank Revokes Licenses from Two Banks," Prime-Tass, July 3, 2008.
20. On Approval of Regulations of the Federal Financial Monitoring Service, Government of the Russian Federation, Ordinance no. 307, June 23, 2004 (most recently amended October 27, 2007), http://www.fedsfm.ru/eng/files/ord307.doc (accessed February 3, 2009), 8.
21. Formerly, Ros-FinMonitoring was within the Russian Ministry of Finance and, as a consequence, its head reported to Russian minister of finance Alexei Kudrin. "Putin Revises Fiscal Monitoring Service, Vows to Fight Corruption," RIA Novosti, September 29, 2007, http://en.rian.ru/russia/ 20070925/8076.html (accessed October 3, 2008).
22. Russian criminal law has two separate offenses that relate to money laundering. According to Alexandra Orlova, Article 174 of the Criminal Code of the Russian Federation "deals with third-party laundering, i.e., the laundering of criminal proceeds by persons not involved in the commission of the predicate offence that generated those proceeds[, whereas] Article 174.1 addresses the case of self-laundering, i.e., where the perpetrator of the predicate [offense] launders the criminal proceeds from that [offense him/herself]."
23. Orlova, "Russia's Anti-Money Laundering Regime: Law Enforcement Tool or Instrument of Domestic Control?" Journal of Money Laundering Control 11, no.3 (2008): 9-10.
24. It is especially significant that neither article of the law gives rise to money-laundering charges. More specifically, offenses defined by art. 193 (failure to return the means in foreign currency from abroad), 194 (evasion of custom payments), 198 (evasion of payment of taxes by a citizen), 199 (evasion of payment of taxes by organizations), 199.1 (failure to carry out the duties of a tax agent), and 199.2 (concealment of monetary means or property of an organization or an individual entrepreneur that is subject to taxation and/or collection) are excluded from the scope of predicate offenses. Hence, these offenses could only give rise to money-laundering charges if they also involved the commission of other criminal offenses (e.g., fraud, forgery of official documents, etc.). Many authors criticized the exclusion of art. 193, 194, 198, and 199 offenses because the commission of these revenue offenses generates large profits. Orlova, Journal of Money Laundering Control 11, no.3 (2008): Ibid., 10-11.
25. "Russian Police Report 2,000 Money Laundering Crimes in 2008," Itar-Tass, May 18, 2008.
26. Itar-Tass, 2008. Ibid.
27. Tatiana Aleshkina, "Anti-Money Laundering Efforts Become Personal," Kommersant, August 11,2008, 9-11.
28. In April 2008, the Russian Association of Banks organized a conference called "Cooperation by Self-Governing Organizations and Supervisory Bodies in Resistance to the Laundering of Criminal Income and the Financing of Terrorism." As could be expected, the Association of Bankers, while noting the importance of combating money laundering, spoke out against burdensome reporting requirements, disruptive bank inspections, and the RCB's promulgation of mandatory AML requirements for banks. The banks prefer that the RCB only issue recommendations and that they be given the authority to refuse to open bank accounts for persons or entities that they view with suspicion. "Banks' Association to Step Up the Struggle with Money Laundering," Itar-Tass, April 29, 2008.
29. Aleshkina, "Anti-Money Laundering Efforts Become Personal."
30. Estimates of capital flight exceed $20 billion. "Moscow Forced to Shore Up Ruble," SKRIN Market & Corporate News, September 5, 2008.
31. "Risks Rise as Route Ahead Is Unclear," Financial Times, October 1, 2008, 1;
32. Catherine Belton, "Investors Are Adopting a Wait and See Approach after Georgia and the Credit Crunch," Financial Times, October 1,2008;
33. "Moscow to Lend $50bn to Indebted Business," Financial Times, September 30, 2008;
34. Sundeep Tucker and Catherine Belton, "Russian Banks Wary of a Foreign Withdrawal," Financial Times, September 29, 2008, 11;
35. "LEX Column Russian Banks," Financial Times, September 26, 2008, 16;
36. and Catherine Belton, "Retreat from Moscow; Investors Admit Defeat as Global Fears Stoke a Russian Crisis," Financial Times, September 18, 2008, 13.
37. Charles Clover, "Moscow Widens Emergency Funding," Financial Times, September 22, 2008, 8.
38. Charles Clover, "Russia's VEB to Buy Ailing Svyaz-Bank," Financial Times, September 24, 2008, 30.
39. "CB Slashes Reserve Requirements for Banks as of September 18," Russia & CIS Business & Investment Weekly, September 19, 2008.
40. Natalia Starostina, "Bankers Persuaded the [RCB]," RCB Daily, October 1, 2008, 9;
41. and Analytical Information Agency for the Russian Stock Market, "[RCB] Will Not Punish Offending Banks," Vremya Novestei, October 1, 2008, 9.
42. Starostina, "Bankers Persuaded the [RCB]," 9;
43. and Analytical Information Agency for the Russian Stock Market, "[RCB] Will Not Punish Offending Banks," 9.
44. "CBR Alerts Banks to Monitor Some Intl Corp Money Transfers," Prime Tass, September 10, 2008.
45. The views expressed in this article are largely consistent with Orlova, "Russia's Anti-Money Laundering Regime."
46. Orlova concludes that "Russian authorities have used the regime to attempt to reform the banking system and to extend their strategic control in the domestic political and business realms. The ineffectiveness of the AML regulations and their inconsistent application to achieve ulterior aims undermine the legitimacy of the regime as a whole."
47. It might be preferable to place less emphasis on suspicious activities reports, which require research and discretion by the financial institution, and assign greater emphasis to transactions above a certain amount, taking into account the countries involved in the transaction and the nature of the parties. A formula for this system could easily be developed and has the advantage not only of reducing errors in the course of deciding whether to file a report; it would also reduce the risk that money launderers could establish relationships with bank or regulatory employees to ensure that suspicious activities reports are not produced when the circumstances suggest that they should be.
48. "Central Bank Asks about Money Laundering," Kommersant, September 22, 2008, http:// www.kommersant.com/p 1029744/r-500/money-laundering- organized-crime/ (accessed October 5, 2008).
49. Bruce Zagaris, "TF, Eurasian Group and Moneyval Evaluate Russian AML-CFT Progress," International Enforcement Law Reporter, September 2008.
50. See also Bruce Zagaris, "International Money Laundering and Bank Secrecy," International Enforcement Law Reporter, December 2008.
51. Anatoly Medetsky, "Lack of Staff to Fight Money Launderers," Moscow Times, October 2, 2008.
52. Anatoly Medetsky, Moscow Times, 2008. Ibid.
53. "Russneft Wins Court Case," International Oil Daily, September 23, 2008.
54. "Russia Reports 7,000 Money Laundering Crimes in 2006-Ministry," Itar-Tass, October 26, 2006.
55. See Anders Aslund, Russia's Capitalist Revolution: Why Market Reform Succeeded and Democracy Failed (Washington, DC: Peterson Institute for International Economics, 2007);
56. Edward Lucas, The New Cold War: The Future of Putin's Russia and the Threat to the West (New York: Pal-grave Macmillan, 2008);
57. Steve LeVine, Putin's Labyrinth: Spies, Murders, and the Dark Heart of the New Russia (New York: Random House, 2008);
58. Lilia Shevtsova, Putin's Russia (Washington, DC: Carnegie Endowment for Peace, 2005);
59. and Miriam Elder, "How the State Got a Grip on Energy," Moscow Times, March 14, 2008.
60. See also "Russia's Largest Raw Material Companies May Be Nationalized," Vedomosti, November 8, 2006.
61. Lilia Shevtsova writes that "in the struggle for property, some law enforcement agencies are openly fighting others; the [MVD] has been pitched against the FSB, the FSB against the Tax Department, the latter against the [procurator]'s office, and so on. Federal and regional security officers confront each other in battle for the ownership of enterprises, the right to extract tribute from entrepreneurs, and for control of the banks. This battle, particularly in the regions, is conducted openly and is violent." Lilia Shevtsova, Russia Lost in Transition: The Yeltsin and Putin Legacies (Washington, DC: Carnegie Endowment for Peace, 2007), 101.
62. For a discussion of Putin's success, despite severe human rights violations, see Sergei Kovalev, "Why Putin Wins," New York Review of Books, November 22, 2007, 64-66.
63. For evidence that behind the current facade is instability, see Lilia Shevtsova, "Think Again: Vladimir Putin," Foreign Policy, January/February 2008, http://www.foreignpolicy.com/users/login.php?story- id=4093&URL (accessed December 29, 2008).
64. Transparency International, "Corruption Perceptions Index 2007," Surveys and Indices, http://www.transparency.org/policy-research/ surveys-indices/cpi/2007 (accessed July 11, 2008).
65. See also Michael McFaul and Kathryn Stoner-Weiss, "The Myth of Putin's Success," Foreign Affairs, January/February 2008, 68-85.
66. The current oligarchs apparently are eager to reach accommodations with the Russian ruling elite. Perhaps that is a sign of pragmatism-if someone has been permitted to earn several hundred million dollars from owning a particular company, why not sell the company to an individual enjoying support from the authorities for half of its actual worth? Graham Stack, "Equally Distanced Oligarchs: Although the Kremlin Still Consults the Oligarchs, They Seem to No Longer Dictate Policy or Appointments," Russia Profile, May 22, 2008.
67. Russia Profile, May 22, 2008.Ibid.
68. Ibid. See also Michael Freedman's discussion with Nikolay Borov of Berezovsky's attempts to destroy Putin's image after the president asserted his "independence" from his former patrol. Freedman, "Dark Forces," Forbes, May 21, 2007.
69. For more on this subject, see Ethan S. Burger, Esq. and Mary Holland, "Law as Politics: The Russian Procuracy and Its Investigative Committee" (paper, New York University Public Law and Legal Theory Working Papers, Paper no. 108, 2008), http://lsr.nellco.org/cgi/viewcontent.cgi?article= 1108&context=nyu/plltwp (accessed February 3, 2008).
70. Anna Smolchenko, "United Russia Creates Post for Putin," Moscow Times, April 15, 2008.
71. Susan Rose Ackerman, Corruption and Government: Causes, Consequences and Reform (New York: Cambridge University Press, 1999), 190.
72. Andrei Illarionov, "Russia Inc.," New York Times, February 4, 2006.
73. Tatyana Netreba and Tatyana Kuznetsova, "Officials under a Glass Roof! Deep inside the Kremlin the Draft National Plan for Combating Corruption Is Almost Ready," interview with Alek-sandr Anikin, Argumenty i Fakty, August 1, 2008.
74. See, for example, Raymond W. Baker, Capitalism's Achilles Heel: Dirty Money and How to Renew the Free-Market System (Hoboken, NJ: Wiley, 2005);
75. Margaret E. Beare, ed., Critical Reflections on Transnational Organized Crime, Money Laundering and Corruption (Toronto: University of Toronto Press, 2003);
76. and Peter Reuter and Edwin M. Truman, Chasing Dirty Money. Roman Kupchinsky's "Crime, Corruption, and Terrorism Watch," formerly a regular report of Radio Free Europe/Radio Liberty, also includes numerous examples.
77. Shevtsova, Russia Lost in Transition, 118-131
78. "Special Report: The World's Billionaires," Forbes.com, March 5, 2008, http://www.forbes .com/lists/2008/10/billionaires08-The-Worlds- Billionaires-CountryOfCitizen.html (accessed March 11,2008).
79. Luisa Kroll and Allison Fass, "Special Report: The World's Billionaires," Forbes, March 8, 2007.
80. See also Maria Rozhkova and Mikhail Overchenko, "87 Russians Made It to the Forbes List," Vedomosti, March 7,2008, B1;
81. and Max Delany, "Record 87 Russians on Forbes Rich List," Moscow Times, March 7, 2008.
82. "Number of Russian Billionaires Grows Ten-Fold in Decade-Official," Itar-Tass, March 26, 2008.
83. Accounting Chamber Chairperson Sergey Stephasin considered this evidence of economic inequities, which he regarded as destabilizing. "Too Many Billionaires in Russia-Stepashin," Interfax, March 26, 2008.
84. See World Bank, Russian Energy Report, November 2007, http://siteresources.worldbank .org/INTRUSSIANFEDERATION/Resources/RER15-Eng.pdf (accessed March 11, 2008).
85. Nikola Krastsev, "Russia: Youthful Billionaires Storm Forbes' List," Radio Free Europe/ Radio Liberty, March 9, 2007, http://www.rferl.org/content/Article/1075155.html (accessed February 3, 2008).
86. In April 2007, Deripaska was stripped of his U.S. visa in connection with his alleged ties to the Russian criminal world.
87. See Jeffrey H. Birnbaum and John Solomon, "Aide Helped Controversial Russian Meet McCain; Davis, Then a Lobbyist, Has Spurred Debate in Reform-Focused Campaign," Washington Post, January 25, 2008, A-1;
88. Andrew E. Kramer, "Out of Siberia, A Russian Way to Wealth," New York Times, August 20, 2006;
89. "Oleg Deripaska Stripped Off [sic] U.S. Visa," Kommersant, April 20, 2007, http://www.kommersant.com/p-10583/r-500/Deripaska-U.S.-visa/ (accessed March 11, 2008);
90. and John Reed and Brian Reid, "Russian 'Rockefeller' Eyes Foreign Expertise," Financial Times, August 10, 2007, 23.
91. Kroll and Fass, "Special Report: The World's Billionaires."
92. See also Marina Pustilnik, "A New Way to Beat the Summer Doldrums," Moscow Times, July 13,2007.
93. Not surprisingly, there are exceptions to all rules. Vladimir Yevtushenkov is believed to have in excess of $1 billion. He is not a fan of the word "oligarch," and his wealth is the result of activities in communications and other high-tech areas. He may be the only Russian billionaire who did not become wealthy as a result of gaining control over natural resources or political connections-over time, future billionaires are almost certain to join him.
94. Pustilnik, "A New Way to Beat the Summer Doldrums."
95. Rozhkova and Overchenko, "87 Russians Made It to the Forbes List."
96. See, for example, Aslund, Russia's Capitalist Revolution, 252n38.
97. According to a Tass report, in 2006 the MVD and the Russian Tax Service prevented approximately 8,000 "fly-by-night" companies from being registered. "Creation of Over 8,000 Fly-By-Night Companies Averted in Moscow," Tass, February 21, 2007. There is no way to estimate the number of such entities that successfully registered in Russia or abroad. Indeed, it is possible to purchase a preformed legal entity in many jurisdictions merely by calling a company that offers such services, providing the information requested, and paying fees and registration costs. Companies also often offer such services as acting as nominal directors at an additional charge.
98. Shevtsova, Russia Lost in Transition, 10-11 and 154-159
99. "Some 100,000 Russian Govt Officials Unlawfully Involved in Business Activities-Prosecutor," Interfax, February 19, 2008.
100. "Roman Abramovich Steps Down as Chukotka Governor," Pravda.ru, http://english.pravda .ru/news/russia/03-07-2008/105689-roman-abramovich-0 (accessed October 2, 2008).
101. Andrew Osborn, "The A-Z of Oligarchs," Independent, May 26, 2006, 1.
102. Adi Ignatius, "Person of the Year 2007: A Tsar Is Born," Time, December 31, 2007, 60.
103. Luke Harding, "Putin, the Kremlin Power Struggle and the $40bn Fortune," Guardian, December 21, 2007, http://www.guardian.co. uk/world/2007/dec/21/russia.topstories3 (accessed January 12, 2009).
104. Anders Aslund, "Unmasking President Putin's Grandiose Myth," St. Petersburg Times, December 4, 2007.
105. Aslund writes, "If these numbers contain any truth, Putin would be the most corrupt political leader in world history, easily surpassing Ferdinand Marcos of the Philippines and Zaire's Mobutu."
106. Pursuant to Section 312 of the USA PATRIOT Act of 2001, should proceeds from foreign corruption enter the U.S. banking system, they may be regarded as "laundered funds" by U.S. law enforcement and regulatory authorities, giving rise to criminal prosecutions of individuals, including foreign nationals, who do not enjoy immunity from prosecution in the United States, as incorporated at 31 U.S.C. § 5318(i).
107. Financial Crimes Enforcement Network, "Fact Sheet," United States Department of the Treasury, http://www.fincen.gov/312factsheet.html (accessed March 3, 2008).
108. Glenn R. Simpson, "Russian Regulator under Fire, Virgin Islands Says Evidence Points to Telecom Holdings," Wall Street Journal, November 14, 2007, A8.
109. Stephen Fidler, "Bermuda Seeks to Liquidate Russian-Linked Companies," Financial Times, February 12, 2007, http://www.ft.com/cms/s/0/ 99a9d07c-bae1-11db-bbf3-0000779e2340 .html?nclick-check=1 (accessed August 13, 2008).
110. Catherine Belton and Stephen Fidler, "US Told of 'Evidence' on Russian Minister," Financial Times, November 15, 2007. The article describes Reiman as a "Putin ally."
111. See also Aslund, "Unmasking President Putin's Grandiose Myth"; and Robert Amsterdam, "Russia's Offshore Telecom Corruption Case," RobertAmsterdam.com, November 15, 2007, http://www.robertamsterdam .com/2007/1 1/russias-offshore-telecom-corru.htm (accessed August 13, 2008). Amsterdam, an attorney representing Russian oligarch Mikhail Khodorkovsky, maintains this Web site.
112. Stanislav Belkovksy argues that Putin chose Medvedev as his successor precisely "because one of the most important problems for the Putin government has not yet been solved-namely the legalization of the Russian politico-economic elite, its capital, in the West. Precisely for that reason Putin was forced to stake on a candidate with the image of a liberal, who will have a certain carte-blanche from and credit of trust with the West."
113. Quoted in Jonas Bernstein, "Stanislav Belkovsky: Putin Will Leave Power Completely," Eurasia Daily Monitor, November 19, 2007, http://www .jamestown.org/single/?no-cache=1&tx-ttnews[tt-news]=33176 (accessed February 3, 2009).
114. Lyudmila Alexandrova, "Russian Govt Heads May Roll, but Not Earlier than March 2007," Tass, November 27, 2006. The Russian state-controlled Gazprom can rely on the Russian government to look out for its interests.
115. See also Lyudmila Alexandrova, "Gazprom Takes over Sakhalin-2, while Sakhalin-1 Is under Scrutiny," Itar-Tass, April 19, 2007.
116. Shevtsova, Russia Lost in Transition, 125.
117. Andrei Sharov, "Yuri Chaika Counts on Defense," Agency WPS, January 11, 2008.
118. "Over 1,000 Senior Russian Officials Prosecuted in 2007-Chief Investigator," Interfax, February 19, 2008.
119. Yekaterina Zabrodina, "Russia's Anti-Corruption Drive Impeded by Selective Justice," Moscow News, December 8, 2006.
120. See generally the General Procuracy's Web site, available at http://eng.genproc.gov.ru/ in English and http://www.genproc.gov.ru in Russian.
121. For a fascinating, detailed account of state expropriation in Sverdlovsk, including a discussion of the role of the courts, see Anna Politkovskaya, "How to Misappropriate Property with the Connivance of the Government," in Putin's Russia: Life in a Failing Democracy (New York: Metropolitan Books, 2005), 114-159
122. Catherine Belton and Ed Crooks, "BP Submits to Kremlin Pressure and Hands Kovykta to Gazprom," Financial Times, June 23, 2007, 1.
123. It is still not clear that the Russian government has intentionally acted to promote the Russian group Alfa Access Renova (AAR) in the TNK-BP case, although the Russian authorities' scrutiny of TNK-BP's taxes, imposition of small fines for alleged labor law violations, and refusal to grant visas to certain BP employees working on the joint venture may be more than a coincidence. AAR is owned by Mikhail Fridman, German Khan, Viktor Vekselberg, and Len Blavatnik, among others. Catherine Belton, Ed Crooks, and Jim Pickard, "Russia to Speed Up TNK-BP Visas' Renewal," Financial Times, July 1, 2008, http://www.ft.com/cms/s/0/454bf7f8-4898-11dd -a851-000077b07658.html (accessed January 12, 2009);
124. Irina Bogdanova, "TNK-BP CEO Fined $125 for Breaking Russian Labor Code Rules," RIA Novosti, June 23, 2008;
125. "Joint Aversion: BP Demands $352 Mln from Russian TNK-BP Shareholders," Kommersant, July 7, 2008, http://www .kommersant.com/ p909848/r-529/BP-demands-compensation-from-AAR/ (accessed January 12, 2009);
126. and Andrew Osborn and Guy Chazan, "BP Venture in Russia Hit as CFO Steps Down," Wall Street Journal, August 5, 2008, A1.
127. Andrew E. Kramer, "The Kremlin Flexes, and a Tycoon Reels," New York Times, July 8, 2007, http://www.nytimes.com/2007/07/08/business/yourmoney/ 08nickel.html (accessed August 13, 2008).
128. Carola Hoyos, "A New Era of Nationalism," Financial Times, June 19, 2007, 2.
129. Catherine Belton, "Glencore Makes a Move on RussNeft," Financial Times, October 25, 2007, 20;
130. and "Russia Starts to Pay Price for Its Energy Strategy," Financial Times, April 21, 2008, 4.
131. Toby Shelley, "Siberia Oil Field Helps Sibir Lift Output by 80%," Financial Times, February 7, 2008,21.
132. Megan Murphy, "Russian Oligarchs Square Up for £2bn Court Fight," Financial Times, April 19, 2008, 4. Berezovsky sued Abramovich, who also lives in London, in connection with this transaction.
133. Catherine Belton, "Rosneft Set for Final Section of Yukos Jigsaw in South of Russia, Financial Times, August 3, 2007, 13.
134. It will be years before definitive works on the fall of Yukos will be produced by disinterested individuals, and even when such books appear, there will always be the question of incomplete information. The New York Times maintains an archive of its stories about Yukos. "Yukos," New York Times, http://topics.nytimes.com/top/reference/timestopics/organizations/y/ yukos/index.html (accessed November 26, 2007).
135. See also Shevtsova, Putin's Russia, 275-82;
136. Catherine Belton, "Khodorkovsky Defense Seeks Chevron Subpoena," Financial Times, August 31, 2007, 21;
137. Clifford J. Levy, "Swiss Reject Request for Yukos Records," New York Times, August 25, 2007, A7;
138. and Anton Troianovsky, "Swiss Court: Yukos Case Is 'Political,'" Washington Post, August 25, 2007, A11. Troianovsky notes the Swiss Supreme Court's decision to reject the Russian General Procuracy's request for legal assistance. This ruling described the Russian government's pursuit of Khodorkovsky as "politically motivated" and designed to "go after a class of rich oligarchs and push aside . . . political adversaries." According to Levy, the Swiss High Court views the Procuracy's actions as constituting an abuse of power. Troianovsky characterizes the court's decision as a "rebuke" to the Kremlin. The decision may reduce the likelihood that future Western judges will grant comity to Russian courts' decisions in high-profile cases.
139. "Russia & CIS Business and Financial Newswire," Interfax, December 28, 2006.
140. McFaul and Stoner-Weiss, "The Myth of Putin's Success, 82 (see n41).
141. Catherine Belton, "The State's Unsaturated Appetite: By May, the Government's Share of Crude Output Could Reach 55 Per Cent," Financial Times, April 20, 2007, 4.
142. Catherine Belton and Neil Buckley, "Steeled to Succeed-Ivanov Sets Out His Tough Vision for Russia's Future," Financial Times, April 19, 2007, 15.
143. "Russia's Velvet Reprivatization: Interview with Oleg Shvartsman," Kommersant, November 30, 2007, http://www.kommersant.ru/doc. aspx?DocsID=831089 (accessed January 12, 2009).
144. For an English translation, see Robert Amsterdam, "Russia's Velvet Re-Privitization," RobertAmster dam.com, http://www.robertamsterdam.com/ 2007/1 1/russias-velvet-reprivatization.htm (accessed August 13, 2008).
145. "Russia's Velvet Reprivatization: Interview with Oleg Shvartsman."
146. Federal Law, On the Procedure for Making Foreign Investments in Economic Companies Which Are of Strategic Importance for Ensuring the Country's Defense Capacity and State Security, April 29, 2008.
147. Some legal scholars, such as George Ginsburgs, have noted that although Russia has participated in the Council of Europe's International Court of Human Rights, the extent to which Russian authorities will allow international law obligations to override domestic law remains uncertain. Ginsburgs, From Soviet to Russian International Law: Studies in Continuity and Change Law in Eastern Europe (New York: Springer, 1998), 1-146.
148. FATF maintains an excellent Web site that deals with all aspects of combating money laundering: "FATF-GAFI," Financial Action Task Force-General Authority for Investment (FATF-GAFI), http://www.fatf-gafi.org/ pages/0,2987,en-32250379-32235720-1-1-1-1-1,00.html (accessed October 3, 2008).
149. FATF, "General Information Russia," FATF-GATI, http://www.fatf-gafi.org/document/60/ 0,3343,en-32250379-32236869-36100796-1-1- 1-1,00.html (accessed October 5, 2008). This Web page is devoted to Russia and contains excellent information and useful links.
150. See FATF, "FTAF Membership Policy," FATF-GAFI, February 29,2008, http://www.fatf-gafi .org/dataoecd/25/48/41112798.pdf (accessed October 5, 2008).
151. FATF, "FATF-GAFI."
152. Predicate offenses are crimes from which the proceeds are laundered. Some crimes are deemed predicate offenses only when committed in the country in which an individual is charged with money laundering. For example, according to this revenue rule, in most cases, tax evasion in a foreign country may not serve as a predicate offense. Pasquantino v. United States, 544 U.S. 349 (2005).
153. FATF, "Summary of the Second Mutual Evaluation Report: Anti-Money Laundering and Combatting the Financing of Terrorism, Russian Federation," FATF-GATI, June 20, 2008, http://www.fatf-gafi.org/dataoecd/51/27/40945440.pdf (accessed February 3, 2008).
154. Developing an effective system of identifying individuals could curb money laundering. Currently, false identifies can be easily created and agents can act on behalf of a PEP.
155. Financial Action Task Force, "Summary of the Second Mutual Evaluation Report."
156. FATF, "Second Mutual Evaluation Report," paragraphs 5, 8, 23, 32, and 39.
157. "Russia Financial Watchdog Recognized as One of the Best in the World," SKRIN Market & Corporate News, August 11, 2008.
158. "FATF Ranks Russia among 5 Worst Performers in Laundering Prevention," Prime-Tass, July 3, 2008.
159. See, for example, Michael Peel, "The Dark Side of London's Success," Financial Times, December 6, 2007, 16. Peel discusses how banking professionals facilitate financial crimes by foreigners.
160. See Baker, Capitalism's Achilles Heel, 1-161 (See n48). Baker discusses the role of "dirty money" in the world economy.
161. Many persons who have no qualms facilitating routine money laundering are far less likely to cooperate if they fear that terrorist financing may be involved.
162. Ed Lucas, "Do Not Let Russia 'Finlandise' Western Europe," Financial Times, October 9, 2008;
163. Marshall I. Goldman, Petrostate: Putin, Power and the New Russia (New York: Oxford University Press, 2008);
164. and Energy Information Administration, "Country Analysis Briefs: Europe," http://www.eia.doe.gov/emeu/cabs/Region-eu.html (accessed October 10, 2008).
165. Andrew E. Kramer, "Austrians Cast Doubt on Russian Arrests in Murder Case," New York Times, June 15, 2007, http://www.nytimes.com/2007/06/15/ world/europe/15moscow.html (accessed October 7, 2008).
166. Senate Permanent Subcommittee on Investigations, Suspicious Banking Activities: Possible Money Laundering by U.S. Corporations Formed for Russian Entities, report prepared by General Accounting Office, 106 Cong., 2d sess., October 2000, GAO-01-120.
167. Suspicious Banking Activities: Possible Money Laundering by U.S. Corporations Formed for Russian Entities, 2000, Ibid., 1.
168. Suspicious Banking Activities: Possible Money Laundering by U.S. Corporations Formed for Russian Entities, 2000, Ibid., 2.
169. U.S. bankers working at Riggs Bank in Washington, DC, laundered billions of dollars from the embassy personnel of Saudi Arabia and Equatorial Guinea and from former Chilean dictator Augusto Pinochet during the 1990s. Riggs Bank personnel simply did not comply with AML regulations from the Bank Secrecy Act. Senate Permanent Subcommittee on Investigations, "Money Laundering and Foreign Corruption Enforcement and the Effectiveness of the Patriot Act," 108th Cong., 2d sess., July 15, 2004, S. Hrg. 108-633, http://hsgac.senate.gov/ public/-files/ACF5F8.pdf (accessed February 3, 2008).
170. Anton Zaritovskiy, "Russian Banks Laundering Hundreds of Billions of Rubles," Izvestia, October 7, 2008.
171. For more details of the rivalry between the General Procuracy and the Investigative Committee, and the Kremlin's unwillingness to resolve the problems that have arisen as a result of the creation of the latter body, see Yevgenia Zubchenko, Marjam Magomedova, and Kira Vasilieva, "Above Fight," Novye Izvestia, June 10, 2008, 2.
172. Konstantin Gaaze, Artyom Vernidub, and Mikhail Fishman, "Dealing with Crooks," Russian Newsweek, June 9, 2008, 17-20.
173. Alexander Sadchikov, "Four Strikes at Corruption," Izvestia, June 26, 2008, 1.
174. Federalnyi Zakon No. 273-FZ, O protivodeistvii korruptsii, December 25, 2008;
175. and Federalnyi Zakon No. 274-FZ, O vnesenii izmenenii v otdelnye zakonodatelnye akty Rossiiskoi Federatsii v sviazi s priniatiem Federalnyi Zakon No. 273-FZ "O protivodeistvii korruptsii Federalngo Zakona 'oprotivo deistvy korruptsy'" [Federal Law No. 273 "On the Introduction of Changes in Separate Legislative Acts of the Russian Federation in Connection with the Adoption of Federal Law No 273-FZ 'On Counteracting Corruption'"], December 25, 2008; in addition there are two separate sets of corrections to the first law and one for the second law. A page of the Russian president's Web site is devoted to new legislation in this area and is available at http://www.kremlin.ru/text/news/2008/12/211017.shtml (accessed January 29, 2009).
176. "War on Corruption ... Is Impossible without Civil Society and Free Media," Nezavisimaya Gazeta, June 5, 2008, 2.
177. Council of Europe, "Criminal Law Convention on Corruption: Strasbourg, 21.I.1999," January 27, 1999, http://conventions.coe.int/ Treaty/EN/Treaties/Html/173.htm (accessed January 29, 2009).
178. United Nations Office on Drugs and Crime, "UN Convention against Corruption," December 4, 2000, http://www.unodc.org/unodc/en/treaties/CAC/ index.html (accessed January 29, 2009).
179. Kseniya Nechayeva, "Government Could Not Care Less about President's Instructions for Combating Corruption," Gazeta, June 15, 2008.
180. Steven Lee Myers, "A New Cycle of Bribes and Purges," New York Times, June 11, 2006.
181. Quoted in Jonas Bernstein, "Will Russia's Next Anti-Corruption Campaign Succeed Where Others Failed?" Eurasia Daily Monitor, January 30, 2008.
182. Eurasia Daily Monitor, 2008, Ibid.
183. Vladimir Isachenov, "Putin Choice Criticizes 'Legal Nihilism,'" Guardian, January 22, 2008.
184. "Russia: Zubkov Urges Lowering Admin Barriers to Combat Corruption," Tass, February 19, 2008.
185. When one hears such rhetoric, it is only natural to wonder why Putin selected an individual like Zubkov to become prime minister. Putin may have selected Zubkov's predecessor, Mikhail Fradkov, because he has an "intelligence background" and he lacked any constituency that would preclude him from being replaced at Putin's whim. Just before Zubkov was named prime minister, he was the head of RosFinMonitoring. He is an individual who may have a great deal of information that can be used to discredit or prosecute Russian government officials, and, if so inclined, he would be in a good position to provide such information to counterparts working for foreign governments. Being "rewarded" with the prime ministry may have been one way for Putin to ensure Zubkov's loyalty. "Russia Gets a New Prime Minister," Economist, September 12, 2007, http://www.economist.com/daily/ news/displaystory.cfm?story-id=9790157 (accessed August 1, 2008).
186. Economist, 2007, Ibid.
187. "Investigator: Corrupt Officials' Income Is Third of National Budget," Prime-Tass English Newswire, June 6, 2008.
188. Bovt, "The Stick, but Not the Carrot," Russia Profile, October 15, 2008.
189. Russia Profile, 2008, Ibid.
190. Vladimir Ryzhkov, "We Have a Package. It Is Not a Bomb. Anticorruption Draft Laws Will Only Affect Power Groupings' Relationships among Themselves," Novaya Gazeta, October 20, 2008.
191. Novaya Gazeta, 2008, Ibid.
192. Nigerian Attorney Bolaji Owasanoue of the Nigerian Institute of Advanced Studies (unpublished remarks, International Bar Association Annual Meeting, Buenos Aires, Argentina, October 16, 2008).
193. Ackerman, Corruption and Government, 229 (see n45).