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. Last Updated: 07/27/2016

Duma Passes Bill to Fight 'Dirty Money'

The State Duma on Wednesday took a big step toward passing crucial legislation to combat money laundering and help the country avoid potentially humiliating international sanctions.

With 237 deputies in favor and 43 against, the Duma passed a bill in a vital second reading aimed at fighting the tide of "dirty money."

"This is the first serious step in the fight against dirty money that is passing through Russia … the presence of this law will strengthen our financial system," Deputy Prime Minister and Finance Minister Alexei Kudrin said in concluding remarks before the vote.

The bill would require banks to report most significant transactions by their clients and demand identification from people wishing to buy stock or foreign currency for cash.

Under the bill, banks, insurance companies and other financial institutions would be required to inform authorities about most operations exceeding 600,000 rubles ($20,500).

These deals would include withdrawals from and deposits into private accounts, buying or selling foreign currency, paying cash to buy stock, exchanging bills for different denomination notes, and using cash as starting capital for a new company.

Banks would also have to report transactions involving numbered accounts, and would be required to demand identification from anyone wishing to open a numbered account or set up an account in the name of another person.

Movement of funds in accounts held by companies that had existed for less than three months would also have to be reported — an apparent attempt to block the creation of front companies for the laundering of criminal proceeds.

An initial version of the bill set tighter requirements, demanding that all deals over 500,000 rubles ($17,250) be reported. The latest revision also removes the requirement to report significant real estate deals, which are covered by other legislation.

The government has strongly urged lawmakers to approve the bill, warning that Western nations may take sanctions against Russia if it fails to pass. Government officials also sought to reassure businesspeople and to guard themselves against potential lawsuits by promising that suspicious operations wouldn't be immediately frozen.

The debate was given added urgency last month when the Financial Action Task Force, an international agency devoted to fighting the legalization of criminally obtained funds, sharply criticized Russia for being a hub of money laundering.

The agency, set up by the G-7 group of the world's richest industrialized nations, also threatened financial restrictions by the end of September if steps were not taken to fight the practice.

The FATF first put Russia on its list of countries lacking the arsenal to tackle dirty money in June 2000.

Only two other nations — the Philippines and the tiny Pacific island of Nauru — were targeted. Both have pledged to take urgent action to meet the FATF deadline.

(AP, Reuters)