NCJ Number
174673
Journal
Transnational Organized Crime Volume: 3 Issue: 3 Dated: Autumn 1997 Pages: 46-72
Date Published
1997
Length
27 pages
Annotation
After reviewing the context of the Russian banking system, this paper discusses criminal enterprises in the Russian banking system, the ramifications of criminal involvement, the response to date, and prospects for the future.
Abstract
As the free market began to take root in the former Soviet Union, organized crime entered a period of explosive growth. Criminal syndicates invaded all sectors of the economy, reaping enormous profits from legitimate as well as illegitimate activities. The banking sector was both a favored and an easy target for criminal penetration. Commercial banking in Russia operates under institutional norms held over from the days of communism; there is little regulation or legislation that pertains to banking, and a general ignorance of the purposes of banks in a capitalist economy. Banks and bank customers are frequent targets for extortion and fraud. High-ranking officials embezzle from their own banks, and criminal organizations use them as laundries for their profits. Criminal groups operate many small banks and wield considerable influence over many others. The Russian Institute for Banking and Financial Managers has estimated that 70-80 percent of private banks in Russia are controlled or influenced by organized crime. Criminal involvement in the banking sector has serious consequences for the rest of the Russian economy. Policymakers have been slow to respond to the state of the banking sector. The crimes involved are often complex and esoteric. Russian law enforcement has neither the resources nor the expertise to deal with them effectively. The prospects for cleaning up the Russian banking system in the next few years are poor. There are some signs of progress, however. Over time, many of the smaller banks have been closed due to market forces and stricter regulation; this will directly impact banks set up to defraud their customers or launder money, and it will make it more difficult to open a bank solely for these purposes. The larger banks will remain, however, and few of the existing measures will impede the criminal elements involved in them. 84 notes