BALANCE OF PAYMENTS DEPARTMENT
BANK OF RUSSIA
Identifying Fictitious
Transactions in Reported
Data for
Balance of Payments
June 20-22, 2013
Porto
MACROECONOMIC ENVIRONMENT FOR
COMPILATION OF THE BALANCE OF
PAYMENTS OF RUSSIA
• Size of shadow economy estimates amount to
20-40%
• Tax evasion and corruption have a place
• Cross-border private capital flows are free,
foreign exchange control has been eliminated,
but post-factum information has been collected
• Domestic investment climate is unfavorable
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RUSSIAN BALANCE OF PAYMENTS’
FEATURES
STABLE PRIVATE
CAPITAL NET
OUTFLOWS
STABLE NEGATIVE
SIGN OF “NET
ERRORS AND
OMISSIONS “ ITEM IN
BALANCE OF
PAYMENTS
DATA SOURCES FOR COMPILATION OF THE
BALANCE OF PAYMENTS OF RUSSIA
• Reporting by banks of several important types of
their customers’ transactions on transaction-bytransaction basis with a lot of detail on every
transaction: International Transactions
Recording System (ITRS)
• Closed aggregated ITRS as a part of the foreign
exchange control post-factum information basis:
“closed” means every transaction should be
coded and reported
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SUPPLEMENTARY DATA SOURCES FOR
IDENTIFYING FICTITIOUS TRANSACTIONS IN
THE BALANCE OF PAYMENTS OF RUSSIA
• Information on the tax payments by resident
entities available through the Payments System
of the Bank of Russia
• Commercial data banks which accumulate
various information on resident entities
• Direct requests to the banks on the transactions
of their clients in single cases
Definition of Fictitious
Transactions For Statistical
Purposes
Fictitious transactions represent financial
flows whose declared purposes are
willfully misstated.
As a rule, such transactions in reality
pursue cross-border money-transferring
(money-laundering) objectives.
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TYPES OF REPORTED TRANSACTIONS
AMONG WHICH FICTITIOUS SCHEMES CAN
BE FOUND
• Trade in goods transactions (imports)
• Trade in services transactions (imports)
• Transactions with securities (purchases
from non-residents)
• Loans granted by resident non-banking
corporations to non-residents
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FICTITIOUS
IDENTIFICATION
BALANCETRANSACTIONS
OF PAYMENTS DEPARTMENT
METHODOLOGY
OF RUSSIA
BANK
ELEMENTS ASSESSED
Resident
counterparty
characteristics
Non-Resident
counterparty
characteristics
Transaction
characteristics
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4
Assessed Features of the Resident
Counterparty in the Transaction
1.
2.
3.
4.
5.
Organizational structure
Size of the resident`s equity
Owners of the resident
Availability of the resident`s financial reports
Sufficiency of the resident`s funds for the
transaction
6. Main activity of the resident
7. Financial results of the resident`s activity
8. Number of personnel
9. Reputation of the resident (previous involvement in
fictitious transactions / positive history of
transactions)
10. Reputation of the bank servicing the transaction
11. Time span of the resident`s activity
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Assessed Features of the Non
Non-- resident
Counterparty in the Transaction
1.Country of residency
2.Reputation of the non-resident
(previous involvement in fictitious
transactions / positive history of
transactions)
3.Residency of the bank through which
the non-resident receives payments
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5
Assessed Features of the Transaction
1. Filling out the documents covering
the transaction
2. Conditions of the transaction
compared to average market
conditions
3. Period of the transaction
4. Existence of a number of similar
transactions in the same period
5. Payments’ frequency
6. Currency of payments
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Examples of Known Schemes Used for
Fictitious Transactions
“Dispersion”
“High
frequency
operations”
“Fragmentation
”
12
6
Rating System Used for the Assessment of
a Fictitious Transaction
•
•
•
After analysis of a feature of the resident and non-resident
counterparty and a feature of the money transfer itself the
points are given
The accumulated points are summed up
The rating is determined and the classification is conducted
LESS THAN A POINTS
REAL TRANSACTION
FROM A POINTS TO B
POINTS
CHARACTERISTIC OF THE
TRANSACTION IS UNCERTAIN
MORE THAN B POINTS
FICTITIOUS TRANSACTION
THE NUMBER OF POINTS USED FOR THE RATING BENCHMARKS
ARE DETERMINED ACCORDING TO THE SCALE BASED ON
RETROSPECTIVE DATA
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EXAMPLE OF RESIDENT ENTITY
ASSESSMENT
Resident Counterparty
YES
NO
Organizational form is LTD
Equity is less than 5000 euro
Is owned by an individual
The predominant type of economic activity
doesn’t match the type of the transaction
Insufficient resources for the transaction
No information about resident
1
-1
1
-1
1
-1
1
-1
1
-1
5
0
Fictitious transactions were conducted in
previous months
5
0
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EXAMPLE OF THE TRANSACTION
ASSESSMENT
YES
FEATURES OF THE TRANSACTION
NO
Payments to residents are less than 5% of payments to
non-residents
2
-2
Payments are made more often than on 30% of the
business days of the month
2
-2
Payments are made through several banks
2
0
The country of the non-resident’s bank is different from
the country of the non-resident and it’s not a country of a
financial center
3
-1
More than 75% of transfers are made in Russian rubles
1
-1
Special features, example: number of securities in the
transaction exceeds the total issue; for “blue chips” –
exceeds 3% of the issue
5
-1
Special features, example: the interest rate for the loan is
less than the market rate
1
-1
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BALANCE OF PAYMENTS’ FICTITIOUS
TRANSACTIONS (BLN. USD)
45,0
40,0
35,0
30,0
25,0
20,0
15,0
10,0
5,0
0,0
2002
2003
2004
2005
2006
2007
2008
2009
foreign trade contracts
contracts with foreign service providers
loans
to their own bank accounts abroad
2010
2011
2012
securities trading contracts
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BALANCE OF PAYMENTS DEPARTMENT
BANK OF RUSSIA
Thank you for your attention!
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