At the end of February, the Plenum of the Supreme Court banned money laundering using cryptocurrency . Corresponding amendments have been made to the court ruling of 2015 on the practice in cases of money laundering. The subject of the crimes under Art. 174 and 174.1 on the legalization of criminal proceeds, cryptoactive assets, which are obtained as a result of criminal activity, are now considered.
Following the FATF standards developed (Financial Action Task Force) , the Supreme Court clarified that the subject of a crime could be “money converted from virtual assets (cryptocurrency) acquired as a result of a crime”. It turns out that in the Criminal Code of the Russian Federation for the first time the term “cryptocurrency” is used, but the definition of this term in the legislation of the Russian Federation is absent.
This irrationality and inconsistency caused some members of the community to worry about the fact that the use of cryptocurrency or the possession of them could be considered illegal. In reality, this is not at all the case.
Why did the Supreme Court of Russia decide to take this step, and what is the future of the crypto community in connection with these changes? Daria Nosova, head of Fintech practice O2 Consulting, Natalia Manuilova, a teacher at BCL, Dmitry Danilov, a lawyer at Zabeyda and Partners, and Baseley & Polyak partner, Natalia Morotskaya, helped answer these questions.
Why cryptocurrency included in the Criminal Code?
The new version of the Resolution of the Plenum of the Armed Forces of the Russian Federation essentially solves several problems. The most important of them can be defined as:
- Comply with the requirements and recommendations of FATF. According to the FATF recommendation, member countries need to identify and evaluate money laundering risks in connection with the use of new and developing technologies . FATF has long paid serious attention to cryptoactive assets in the aspect of combating money laundering and countering the financing of terrorism. The FATF Recommendation 15, referred to by the Supreme Court, received several more updates, the last of which, introduced in October 2018, concerns virtual assets.
- Introduce the concept of “cryptocurrency” in the criminal law field, which actually exists, but is not yet enshrined at the legal level. Indicate that this type of assets exists and that it can be used as a tool for laundering criminal proceeds and other illegal activities.
- To rely on these changes in the Criminal Code of the Russian Federation in the handling of criminal cases in which the cryptocurrency somehow appears.
- Involve a specialist or expert in cryptocurrency in the criminal process. The definition of the rights and obligations of such a specialist is disclosed in Articles 57 and 58 of the Code of Criminal Procedure of the Russian Federation.
In general, experts agree that the changes are introduced mainly in connection with the recommendations of the FATF.
How will this affect users of cryptocurrency exchanges, exchangers and owners of cryptocurrency?
In short, this question can be answered like this: no way . If you do not violate the legislation of the Russian Federation: you do not launder funds obtained by criminal means with the help of cryptocurrency, do not sell drugs for cryptocurrencies, and do not do anything illegal with the help of cryptocurrencies – you can be calm.
“The changes do not mean, contrary to panicky comments on the network, that any sale of cryptocurrency for Fiat will be a crime. Must be part of the crime under Article 174 or 174.1 of the Criminal Code of the Russian Federation: cryptocurrency must be acquired by criminal means, and the person legalizes (launders) them. For example, cryptocurrency was obtained as a result of theft, fraud (including, for example, fraudulent ICO), ”said Natalya Morotskaya, partner of Baseley & Polyak.
According to experts, each such case can have its own subtleties. And if everything is extremely clear with fraud and theft, then there may be discrepancies in money laundering: it all depends on how the person who decided to illegally legalize cryptocurrency acted.
“For example, Ivanov received stolen Bitcoins, cashed them and invested in his legal business. Here the goal to launder illegally obtained funds can be traced. If Ivanov used them for personal needs (bought clothes, for example), such actions are not a crime under paragraph 11 of the Plenum's Decree on Legalization, ”says lawyer of Zabeida and Partners lawyer and invited expert of the digital economy community of lawyers, BCL Dmitry Danilov.
Of course, it cannot be excluded that other operations with criminally obtained cryptocurrency: transfer to another person, conversion, investing in a business – will also be considered as a crime.
“In each specific case, the court should establish the existence of a goal to give a legitimate view to the possession, use and disposal of monetary funds or other property acquired in a criminal way. And we are not talking about all operations with cryptocurrency or other digital assets, ”says Natalia Manuylova, teacher of the BCL supplementary education program.
Note that the absence of this goal excludes the criminal law qualification of the offense, but allows for bringing the person to administrative responsibility under Art. 15.27 of the Administrative Code in the presence of relevant circumstances.
What will change with the introduction of cryptocurrency in the Criminal Code?
It is worth noting one important qualitative change that occurred after the amendments to the Criminal Code of the Russian Federation, namely, the informal recognition of the property status for cryptocurrency.
As Rosfinmonitoring stated in its FATF response, “currently in connection with the commission of crimes using cryptocurrency, despite the uncertainty of their legal status in Russian legislation, in fact, they are actually equal to property (in accordance with the purposes of cryptocurrency) and are identified in monetary equivalent.
From this we can make a certain conclusion about the content of bills on cryptocurrency, which must be adopted before July 1, 2019 .
In addition, it is worth noting the position of FATF on the issue of cryptoactive assets turnover from the point of view of “anti-laundering” problems, since Russian legislation is forced to meet the requirements of the organization.
“After all, sooner or later Russia will apply the updated standards. If we refer to the draft clarification for Recommendation 15, published on February 22, 2019, this summer, a serious tightening of standards for cryptoactive assets is planned , ”says Daria Nosova, head of OI Consulting fintech practice.
A document published in February clearly states that “virtual assets” should be treated as assets, income, assets, or other relevant value.
“In other words, if someone doubted this, it is now obvious that it’s already irrelevant to consider cryptocurrency as something non-proprietary. Secondly, the concept of a “virtual assets provider” (VASP) is used. Such organizations or citizens should always be identifiable (that is, anonymity goes into an illegal field), registered and licensed, ”concluded Daria Nosova.
In essence, this means that uncontrolled VASPs in any form will be considered non-legalized, and therefore, based on the principles of anti-laundering regulation, and potentially illegal (criminal). According to experts, it is in this direction that international practice is moving in fairly rapid steps.
Publication date 06/03/2019
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