Russian Finance Ministry explains criminal penalties for undeclared bitcoins

The need for criminal penalties for failing to declare cryptocurrencies stems from the high risks of money laundering. This was stated by Business FM stated Deputy Finance Minister Alexey Moiseev.

According to him, the impossibility of verifying the origin of bitcoins by default makes them “grey capital”.

“If we are talking about money that is in banks, then some system has already checked where it came from, and so on. The same goes for real estate. As for cryptocurrencies, there is no such thing.”

Moiseev said that any large movements of funds require scrutiny:

“If you take any country not on the FATF blacklist and transfer money or buy real estate there, you will be checked ten times, and even if you have “white” money, your account will not be opened immediately. This is actually a problem — in many countries you cannot open an account without specific recommendations.”

The deputy minister also spoke of an increase in the amount laundered through cryptocurrencies.

“Both our and international analysts, and the European Union have published such information that laundering and crime-finance turnover has shifted to very large volumes specifically towards cryptocurrency turnover. Formally, the Ministry of Finance’s amendments are connected with the heightened danger of cryptocurrency in terms of money laundering,” he explained.

Earlier, the Russian Finance Ministry prepared a new draft of amendments to the Criminal Code and the Criminal Procedure Code related to cryptocurrencies. It provides multi-million-ruble fines and prison terms for systematic failure to report to the tax authorities when conducting large-sum operations with digital currency.

Experts already called the proposed measures “inadequate” and warned that a large portion of traders from the Russian Federation would fall under them.

Several major scandals in the banking sector, including money laundering through the investment bank “Troika Dialog” and criminal schemes by oligarchs involving top global banks, have shown that offshore zones provide a greater degree of anonymity than the public Bitcoin payment network. Reports on financial transactions between offshore firms can be closed on an offline server or simply deleted if desired; the blockchain does not provide such an option.

Thus, Bitcoin is effectively less convenient and less safe for money laundering.

In July 2019, analytics company Messari found that traditional money is used for laundering 800 times more often than Bitcoin.

In March 2020, Chainalysis established that only one in a hundred Bitcoin transactions is linked to illicit activity.

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