Russia cleans up banking system

Putin signed the bill into law to protect Russia's international reputation

MOSCOW, Russia -- President Vladimir Putin has introduced legislation designed to clean up Russia's money-laundering reputation.

He signed into law a bill that requires banks to report large transactions by their clients, the Kremlin said in a statement on Tuesday.

Moscow hopes the will law will lead to Russia being removed from a blacklist of 15 nations considered to be not cooperating in the international fight against money laundering.

The law, approved last month by both houses of parliament, takes effect from February 2002.

Under it, Russia will form a special agency to monitor bank transactions exceeding 600,000 roubles ($20,700).

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The agency will also monitor suspicious transactions involving rapid transfers of cash from one account to another, Lvov said.

It will bring Russia into compliance with an international convention against money laundering, Deputy Finance Minister Yuri Lvov said.

Although Russia signed the convention in May 1999, its politicians took until last April to ratify the treaty.

In the meantime, it earned the country a slot on a blacklist of 15 nations deemed "non-cooperative" in the international effort to fight money laundering.

The bill was initially pushed into parliament by the government in fear of a sanctions threat by the international crime fighting body, the Financial Action Task Force (FATF).

FATF was set up by the G7 group of the world's richest nations to monitor and eliminate dirty money.

But the bill was delayed due to complaints by centrist and liberal members that it lacked details of how the monitoring of groups and individuals' large spending would be carried out.

Lvov told a news conference that the new law should allow Russia to be removed from the blacklist, the Interfax news agency reported.

Money-laundering is a term for transferring money earned from criminal activity through a series of accounts to disguise it as honest profits.

Since the breakup of the Soviet Union, Russia has been plagued with capital flight, some of it criminal profits, but much of it from ordinary businesses seeking to protect their earnings from high taxes, corrupt bureaucrats and political upheavals.

Putin has declared a crusade against money laundering, which he estimates at $20 billion a year, though government and central bank figures vary between $10-25 billion a year.