Russia registers steep drop in financial fraud losses in 2016

Maria Nikolova

The drop may be attributed to tightening of Russian laws, which currently envisage a sentence of up to 6 years in prison for financial pyramid architects.

Russians have lost RUB 2 billion (USD 33.6m/EUR 31.6m) due to activities of fraudulent financial schemes in 2016. This compares to losses of RUB 5.5 billion incurred in 2015.

The numbers were reported by Russian newspaper “Izvestia”, quoting Valeriy Lyakh from the Central Bank of Russia.

The number of financial pyramids uncovered by the Central Bank of Russia last year was around 180, compared to 200 in 2015.

Amid the factors for these results are the amendments made to Russian laws – in May 2016, the criminal code was toughened with regards to financial crime. As per the amendments, organization of a financial pyramid entails a prison sentence of up to 6 years and a fine of up to RUB 1.5 million.

What is the situation in the Russian Forex market?

According to numbers, provided by Russian newspaper “Kommersant”, the Bank of Russia received 210 client complaints against Forex companies registered overseas in 2016. This is slightly down from the 236 complaints received in 2015.

Under the Forex law, which Vladimir Putin signed in the end of 2014, foreign corporate entities are not permitted to offer/promote their services to Russian clients from October 1, 2015. Russian FX firms that do not have a Forex dealer license and are not a member of a Russian Forex self-regulatory organization, are not allowed to advertise and offer their services to Russian clients either.

Until this point, only six FX firms have obtained the coveted Forex dealer licenses in Russia – Alpari Forex, VTB 24 Forex, Teletrade Group, TrustForex, Finam Forex, Forex Club. According to the nation’s financial “Megaregulator”, companies are not in a hurry to apply: in total, 10 companies have filed for such regulatory permissions.

The reasons for this reluctance include the stringent requirements for securing an FX dealer license – for instance, a minimum capital requirement of RUB 100 million (USD 1.68m/EUR 1.58m). The financial bill grows further once the expenses for software and accounting equipment – which may reach RUB 12 million a year, are factored in. Then, there is also an initial membership fee for the Compensation Fund, which stands at RUB 2 million…

The Forex sector has stalled in regulatory terms thanks to a bureaucratic formality, which requires FX dealers to comply with a set of basic standards. The document explaining what these basic standards should be was published by the Central Bank in November 2016, with the date for the rules to come into effect yet unknown – experts outline different time for this but agree that this should happen at some point in 2017.

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