Know Your Customer

From July 1, 2022, the Know Your Client (ZSK) anti-money laundering platform from the Bank of Russia began operating in Russia - a service to which all Russian credit organizations are obliged to connect to assess their clients for involvement in dubious operations under the new rules and exchange this information with the Central Bank.

Legal entities and individual entrepreneurs are divided by banks and at the same time by the regulator into three groups - depending on the degree of risk of violation of anti-money laundering norms.

2022

Russian darknet sees surge in demand for KYC document scan rendering services

On the Russian darknet, there is a surge in demand for document scan rendering services for banks. So, according to Kaspersky Digital Footprint Intelligence, the frequency of mentions of the "know your client" (KYC) procedure in ads on both Russian and foreign resources in 2021 was about 200 messages per month, and in 2022 it increased to 500 messages.

Growing demand for forgery in the Darknet

According to Kommersant, it is proposed to "draw" scans of documents (passports, rights, utility bills, bank statements, and so on) for the requested data, photomontage (photo with a document by the face, document against the background, document in hand, etc.), color printing and lamination for photos, live drops (dummy people) for photos and video verification with documents (printed dummy), Kommersant appreciated the ads presented.

High-quality fakes can cost several hundred, dollars USA"there is no talk of thousands of dollars yet," says Fyodor Muzalevsky.

A live drop with documents is the most expensive, - said the founder of the data leak intelligence and darknet monitoring service. DLBI Ashot Hovhannisyan

According to the publication, the demand for documents for KYC verification is associated with an increase in interest in foreign exchange services and financial online services, experts explain. Often these are bookmakers, crypto exchanges and neobanks, conducting KYC mainly online. They can also be used to open bank accounts and cards in some banks of the CIS countries.

Sites in the event of a fake detection, as a rule, refuse a person to provide a particular service. They can apply to law enforcement agencies, but they do this extremely rarely and only in cases where such actions entail additional illegal consequences, said Irina Shcherbakova, a lawyer and partner of Kazakov & Partners.^[1]

RS-Connect module. Exchange with ZSK platform "to ensure operation

R-Style Softlab on June 6, 2022 announced the appearance of another module in the line of products for interaction with GIS RS-Connect - "RS-Connect. Exchange with the ZSK platform, "which provides work with the Bank of Russia" Know Your Client "service. Read more here.

2021

Russia adopted a law on the creation of an "anti-money laundering" platform based on the Central Bank

On December 9, 2021, the State Duma adopted in the third (final) reading a bill on the introduction in Russia of the Know Your Client anti-money laundering platform based on the Central Bank.

In accordance with the innovations, the regulator will assign banks' customers - legal entities and individual entrepreneurs - one of three levels of risk of suspicious transactions (low, medium, high). Suspicious means transactions with cash or other property allegedly carried out in order to legalize criminal proceeds and finance terrorism.

The State Duma adopted a law on the introduction of the anti-money laundering platform of the Central Bank

• The low risk level will be assigned by the platform to those persons who carry out their activities without signs of dubious operations. They will not have restrictions on opening a bank account and conducting transactions to transfer funds to other persons with a similar level of risk.
• The average level of risk will be for those who facilitate the withdrawal of large customers' funds to the shadow sector and conduct activities in sectors of the economy with increased risks. Operations will not completely stop for them, but the bank will be able to refuse them to open a bank account and conduct transactions if there are suspicions of money laundering.
• A high level of risk will be assigned to those who do not conduct real business, prevent the establishment of beneficiaries by tax and law enforcement agencies, and calculate the shadow sector of the economy. As a result, high-risk individuals may be prohibited from serving in banks and conducting transactions. They will be able to use only certain operations to ensure the life and settlements with government agencies, creditors and employees.

Another amendment introduces into the "anti-money laundering" law (FZ-115) a norm that will oblige organizations before introducing new products and services designed to serve customers, assess the possibility of using them to legalize proceeds from crime, and take measures aimed at reducing this opportunity.

The changes are aimed at reducing the burden on bona fide entrepreneurs, primarily small and micro-businesses, by reducing preventive restrictive measures by banks, and reducing business costs to interact with them. The law is also designed to increase the efficiency of the "anti-money laundering" systems of credit institutions and reduce the volume of suspicious transactions in general.^[2]

Central Bank launches a platform to combat money laundering

In mid-September 2021, the launch of the Know Your Client (ZSK) platform, designed to combat money laundering, was announced. 30 Russian banks decided to join it, said the chairman of the Central Bank of the Russian Federation Nabiullina.

According to her, the fight against unfair practices of banks is becoming for the industry regulator as important a task as a few years ago it was to cleanse the sector of weak players, as a result of which the number of market players decreased significantly.

Another important area for the development of the banking sector should be a behavioral reset, that is, a course towards responsible and honest, in every sense of the word, doing business. This is important for building trust in the financial market, "said Elvira Nabiullina.

The Bank of Russia launches a platform to combat money laundering, 30 banks will join it

Ilya Yasinsky, director of the financial monitoring and currency control department of the Central Bank, says that by the second quarter of 2021, the ZSK platform will be scaled up to all credit organizations. Several dozen Russian credit institutions from various sectors of the banking business - large, medium, small banks - will participate in piloting the use of the platform, he said.

According to Yasinsky, by mid-September 2021, about 250 models of various dubious operations are being tested within the framework of the ZSK, while work is being carried out in two directions: these are scorring calculations and the use of machine learning algorithms.

Nabiullina believes that the connection of the regulator to the assessment of the risks of dubious operations will primarily be useful to small companies that are served in Russian banks.

I still cannot understand the objective reasons why this system raises questions. I don't see them. It seems to be such a project from which everyone benefits, compliance costs simply fall, "she said in a conversation with RBC.[3]

2020: Introduction of the bill to the State Duma

At the end of November 2020, a bill developed by the Central Bank of the Russian Federation on the creation of a single register of suspicious bank clients was submitted to the State Duma. The system will be called the "ZSK Platform" ("Know Your Client" - the main requirement for banks from anti-money laundering legislation).

The platform will divide customers into three categories. In the "red" zone of high risk there will be companies requiring online control. The "yellow" zone will include "dubious" clients whose operations the bank will analyze offline. The vast majority of companies and entrepreneurs will remain in the "green" zone and will not require increased attention from bankers.

The Central Bank of Russia is developing a single register of suspicious bank clients - "ZSK Platforms"

As Rossiyskaya Gazeta writes with reference to the bill, banks will be able to refuse persons with a green level of risk only if they conduct operations to transfer money to individuals or to accounts in foreign banks, withdraw cash, as well as transfer money to legal entities and individual entrepreneurs, which are classified as a yellow level of risk.

Banks will be obliged to inform the client about his assignment to a particular risk group. The criteria for classifying customers as yellow and red zones will be set by the Bank of Russia together with Rosfinmonitoring. At the same time, the Central Bank will use data on transactions, messages from banks about refusals to conduct operations on the basis of AML/CFT, etc.

If the client is in the red zone, he will be denied:

• in service admission;
• in issuing balances of money from the settlement account;
• in the transfer of money balances to another bank;
• in the execution of a payment order;
• in access to the Express Checkout System;
• in access to the Internet bank.

The Central Bank hopes that the bill will reduce the burden on bona fide entrepreneurs, primarily small and micro-businesses. The number of duplicate requests for the same information from different credit institutions will decrease.^[4][5]

2019: Platform announcement

On October 15, 2019, the Central Bank of the Russian Federation presented the Know Your Customer solution, designed to identify suspicious customers according to 100 criteria. The platform will divide legal entities and individual entrepreneurs into three categories.

In the "red" zone of high risk there will be companies requiring online control. They will account for 0.6-0.9% of customers; The "yellow" zone will include "dubious" clients (0.4-0.6% of the total), whose operations the bank will analyze offline; The vast majority of companies and entrepreneurs will remain in the "green" zone and will not require increased attention from bankers.

The Central Bank of the Russian Federation presented a decision "Know Your Customer," designed to identify suspicious customers according to 100 criteria

It is assumed that the regulator will track the behavior of companies according to a special system to which they will be required to connect. This approach will replace the current one (by mid-October 2019), within which the Central Bank monitors data from payment systems, banks, law enforcement agencies and Rosfinmonitoring.

According to Kommersant, the platform will be created together with banks and banking software vendors. The decision has already been tested by Sberbank. According to Sberbank Vice President Dzhangir Dzhangirov, the bank willingly entered the program as a "test elephant."

In a conversation with the publication, the representative of the Central Bank explained that the system will only help assess the level of risk of customers, the main work will remain with banks.

Market participants interviewed by the newspaper generally approve of the Central Bank's initiative. However, they note: it is important that the assessment does not turn into a tool of pressure on the business.

The press service of Otkritie Bank believes that the new regulator platform will reduce the costs of financial institutions. We are talking about the costs of using external information systems, as well as working with customer claims.^[6]

Notes