Russia: Organised Crime and Money Laundering
| Pages | 360-373 |
| Published date | 01 February 1998 |
| DOI | https://doi.org/10.1108/eb027162 |
| Date | 01 February 1998 |
| Author | Leonid L. Fituni |
| Subject Matter | Accounting & finance |
Russia
Russia: Organised Crime and Money Laundering
Leonid L. Fituni
TENDENCIES, DYNAMICS,
TECHNIQUES
'An old wise owl lived in an oak;
The more he saw, the less he spoke.
The less he spoke of what he knew,
The more his offshore assets grew.'
After Beverly Hallin
Russia-related money laundering is often men-
tioned in the international press and reports of
government agencies as a serious problem in inter-
national financial and banking security. However,
very few publications study the problem in detail.
Particularly scarce are those which reveal the roots
of the phenomenon, its real spread and relevance,
as well as techniques and laundering schemes.
Knowledge is also very limited about how Russian
authorities and law enforcement agencies are com-
bating the legalisation of illicit funds. The goal of
this article is to look at the problem of Russia-
related money laundering comprehensively, offer-
ing the reader the vision of someone in the
battlefield, rather than that of a detached observer.
THE CURRENT SITUATION
Money laundering has become a problem which
causes much concern in the international com-
munity. In Russia, however, the public pays less
attention to this offence, which is considered by
ordinary Russians to be a problem of the rich
(both of those who launder and of those whose
wellbeing is in any way affected by it). The rich
(those whose annual income exceeds $20,000)
represent only 2 per cent of Russia's 148 million
people. The overwhelming majority of Russian
citizens have virtually no savings or economic
assets of significance. Since the downfall of com-
munism over 33 per cent of Russians have been
marginalised by reforms in the subsistence eco-
nomy. The majority of them survive thanks to
small plots of land of 600 sq. m on average which
they were given in the old days, where they grow
potatoes and other subsistence crops. They have
nothing to lose, are politically indifferent and seem
not to be really stirred by the social problems
which directly influence their wellbeing. Living in
a state where the authorities are constantly trying
to deprive them of what little they still possess,
with the average life expectancy reduced by ten
years,
having to face rampant crime right in their
backyards, even those Russians who suspect that
the funds that had been stolen from them in the
course of the reforms require laundering, still
often do not perceive in that any negative conse-
quences for themselves. Apathy and weariness
caused by continual social transition have become
a major stumbling block on the road to combating
the decomposition and criminalisation of Russian
society.
The role of the criminal world in the ongoing
economic and political processes in Russia is extra-
ordinarily high. Organised, ethnic, violent, white-
collar and other criminals are squeezing honest
compatriots out of nearly every niche of social,
business, political and even cultural life.
Not one sector of the economy is safe from
criminal infiltration. According to some estimates
about 40 per cent of the GDP is generated by the
shadow economy and criminal economic activity.
This has resulted in a situation in which, according
to the 1998 figures provided by the Russian parlia-
ment (Duma), about 9 million Russians are
employed full time in the shadow economy.
Organised crime controls over 40 per cent of pri-
vate enterprises, 60 per cent of state enterprises
and 85 per cent of commercial banks.1 Business
people and criminals are less and less distinguish-
able from each other.
Staff at the Ministry of the Interior's Research
Institute have conducted a study of the participa-
tion of businessmen in crime. As the basis, they
took the statistics of crimes committed in the
Moscow region and the Russian Federation as a
whole. The results showed that the ratio of
common crimes and office crime or crimes com-
mitted in the professional sphere by managers of
commercial enteprises is 1:1. The breakdown of all
registered cases was as follows: 42.1 per cent —
embezzlements (half of them those of funds), 15.5
per cent — unlawful possession of arms, 11.5 per
cent — extortion,. 6.2 per cent — robbery and
Page 360
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