After felling more than a quarter of its banks, Russia wants to make sure the survivors get more than a slap on the wrist for flouting the rules.
As part of its campaign against money laundering, the Bank of Russia is taking a page from the playbooks of regulators in the US and Europe. It’s now planning to reduce the reporting requirements on lenders while increasing the punishment for getting caught, Deputy Governor Dmitry Skobelkin said in an interview in Moscow, Bloomberg reported.
“We are prepared to reconsider that approach,” Skobelkin said. “But in that case we need to raise responsibility proportionally.”
Unlike the billions of dollars in penalties imposed for infractions on US and European banks, Russia hasn’t leaned heavily on fines during an unsparing purge of the industry by Governor Elvira Nabiullina. Even after reducing what it calls illegal capital flight to 64 billion rubles ($1 billion) in the first quarter, less than half the level a year earlier, the Bank of Russia is asking lenders to commit to cutting operations that have hallmarks of money laundering by 20% every quarter, according to Skobelkin.
Nabiullina’s Cleanup
The financial industry is fighting a crisis as asset quality worsens during the second year of recession, the longest since President Vladimir Putin came to power. Regulators have been hunting down banks deemed mismanaged or under-capitalized, with Nabiullina shutting down more than 250 banks since her appointment in 2013 to restore the system to health.
With the closures, the number of banks suspected of a large share of dubious transactions has fallen to five at the end of the first quarter from 150 in mid-2013, Skobelkin said. The regulator defines “dubious operations” as fake trades or loans used to move money abroad.
The central bank has begun setting higher fines. The record, imposed on an unidentified bank by the regulator this year, amounted to “several million” rubles, according to Skobelkin. The large lender that paid it is now enjoying a “new, more correct life,” he said.
“It was a useful lesson,” he said. “No one can prevent us from giving out large fines in the future.”
