According to the decision of the Russian Supreme Court (SC), the conversion of bitcoins into rubles can be considered the legalization of proceeds from crime. This decision was made in relation to a case that considered the withdrawal of funds received in cryptocurrency for the sale of psychoactive substances into rubles. According to the media headlines, it seemed that after the decision of the Supreme Court in the Russian Federation, any transfer of bitcoins into rubles would be considered illegal. Lawyer Yuri Brisov, LL.M, MJ, partner at Digital & Analogue Partners explained to The Insider why this is not the case:
It is important to note that in the case before the Supreme Court, as well as in the lower courts, the issue of cryptocurrency as such was not resolved. Moreover, it cannot be said that the courts have formed a new practice on the laundering of proceeds from crime. Rather, the courts clarified the scope of Article 174.1 of the Criminal Code of the Russian Federation, which is relevant to cryptocurrencies only in the case of this particular case. This decision does not determine the fate of cryptocurrencies and other digital assets in general.
What is money laundering
Let's say a person sells drugs, which is an illegal act. This person receives a lot of cash, and by criminal means. It is difficult to do something with cash today, so they need to be credited to the account somehow, that is, “laundered”. To launder proceeds, criminals traditionally use markets, beauty salons, art galleries, restaurants and car services – those businesses that operate with a large amount of cash and do not require, due to a small check or confidentiality, the disclosure of the identity of buyers. Money passed through "laundering" is considered to be laundered proceeds. This is a separate criminal unit.
One violation of the law in the Supreme Court case was the sale of drugs. The second violation of the law is the laundering of criminal money and its introduction into economic circulation. All these schemes have long been known in countries with different legal systems, and the courts are well aware of how to apply the relevant articles of the criminal law to them. Such crimes are included in the group of "white collar" (white collar crimes), that is, committed, as a rule, by managers with higher education who understand how the financial and legal worlds work.
Cryptocurrencies have appeared relatively recently. Despite the fact that the international anti-money laundering group FATF offered the first recommendations on the application of anti-money laundering rules back in 2018, due to the technical complexity of the blockchain, law enforcement officers in all legal systems did not immediately figure out how to use the provisions of criminal law in relation to digital assets.
Directly converting cryptocurrency into rubles is not considered a violation of any law in Russia. Violation of the law is the introduction into the economic circulation of a cryptocurrency obtained by criminal means. The court in this case considered whether the exchange of cryptocurrency for fiat currency can be considered sufficient grounds for qualifying actions as legalization of proceeds from crime. As a result, he came to the conclusion that, since the cryptocurrency was obtained illegally, and replenishment of the bank account with rubles makes it possible to spend this money, the very fact of withdrawing the cryptocurrency into fiat is sufficient for an independent crime of legalization.
Practice will be further refined. The courts will decide, for example, whether the exchange of an anonymous cryptocurrency for stablecoins (cryptocurrencies pegged to the US dollar or euro) is a sufficient basis for legalization or not. And there will be many more such cases. They are technical in nature and relate only to the amount of time that a criminal can receive.
What lessons can be learned from this case?
If someone asks you to use your card for exchange transactions on the crypto market, you can become an accomplice in crime. If you make transactions with crypto-currencies, try to accompany them with real documents: contracts, checks, acts – the requirements for primary documentation apply to crypto-currency transactions as well as transactions with state currency.
Try not to engage in anonymous transactions: do not purchase cryptocurrencies or even gaming or collectible tokens (NFTs) anonymously. The laws of most countries in the world require the disclosure of information about the parties to transactions in cryptocurrency, the same as when performing banking transactions. These laws are aimed at making it more difficult for criminals to use cryptocurrency in illegal transactions, and innocent people and services do not become accidental accomplices in other people's crimes.