Russian Banking

Russian Banking

Evolution, Problems and Prospects

New Horizons in Money and Finance series

Edited by David Lane

Russian Banking considers the rise of commercial market-oriented banks in Russia, their links with government and non-financial companies and their role as intermediaries in the provision of finance for investment. The contributors explore the legacy of the Soviet past and current functions of the Russian banking system, contrasting these with those in other post-communist societies and describing peculiarities such as informal networks and corruption.

Chapter 5: Banks and Illegal Activities

Heiko Pleines


1 Heiko Pleines Capital flight, tax evasion and money laundering are often seen as major problems of post-Soviet Russia, indicating economic breakdown, the government’s failure to create a functioning state and the criminalization of society. At the same time, it is often assumed that banks – and especially those banks belonging to influential businessmen, so-called ‘oligarchs’ – are at the centre of these problems. Illegal capital flight, tax evasion and money laundering are indeed all based on schemes which are intended to hide certain financial flows from state authorities. However, this does not necessarily imply that banks are the main culprits. This paper will examine the role of Russian banks in these three illegal activities. In the first three parts the main characteristics of illegal capital flight, tax evasion and money laundering will be depicted, devoting particular attention to schemes requiring the involvement of banks. In the following part the findings will be summarized, concentrating first on the importance of Russian banks for the realization of these illegal activities and second on the degree to which the Russian banking sector has been criminalized because of its involvement. The conclusion presents the general policy options available to tackle related problems. ILLEGAL CAPITAL FLIGHT Capital exports are used to finance imports of goods and services or investments abroad. They are a result of international economic integration. Over recent decades a general tendency of capital exports from developing countries to the main industrialized economies can be observed. Capital flight is usually defined to...

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