​Russia’s Supreme Court for the first time recognizes the conversion of BTC into rubles as money laundering

What’s new? The Supreme Court of the Russian Federation has overturned the acquittal on charges of legalizing bitcoins obtained for selling drugs. Initially, the defendant in the case was found guilty only of trafficking in illegal substances, but the court found that the conversion of cryptocurrency into rubles and their subsequent transfer to third-party bank cards and accounts is money laundering and a violation of the law, reports the Russian Legal Information Agency (RAPSI).

News on the RAPSI website

Details of the case. According to law enforcement officials, the defendant in the case sold drugs for cryptocurrency, then converted the funds into rubles and transferred them to the accounts and cards of his cohabitant’s daughter. The court initially found him guilty of drug trafficking but acquitted him on charges of money laundering.

After the verdict, the Deputy Prosecutor General appealed. He pointed out that the accused had purposefully transferred funds, having entered more than 8 million Russian rubles (RUB) into legal circulation and avoided the procedure of bank control.

The final decision of the Supreme Court notes that the subject of legalization (laundering) can also include funds converted from virtual assets (cryptocurrency) acquired as a result of the crime (Decision of July 7, 2015, № 32 [ed. from 26.02.2019]).

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“Within the meaning of the law, these financial transactions knowingly disguise the connection of the legalized property with the criminal source of its origin for a guilty,” the court stressed.

The Supreme Court explained that the convicted person had a goal to legalize funds through consecutive financial and banking transactions.

“Contrary to the conclusions of the court of the first and appellate instances, the corpus delicti of the crime under Article 174.1 of the Criminal Code of the Russian Federation does not require mandatory involvement of the money legalized in economic turnover, since liability under the specified article of the law comes upon establishment of the very fact of financial transactions in order to give a lawful appearance to the possession, use, and disposal of money or other property,” the court’s decision notes.

The judicial board decided to cancel the acquittal and sent the case for a new hearing to the Ryazan regional court.

Expert’s comments. According to Andrey Tuzov, head of White Collar Crime Practice at EPAM Law Offices in St. Petersburg, in the near future, cryptocurrency may be assigned a judicial understanding that it is a property with which transactions can be made, including payment transactions.

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“As with any other property, trades and financial transactions can be made with it, including those aimed at giving the appearance of the lawful origin of the money derived from that property. At the same time, the corpus delicti of legalization requires not just transactions and trades, but the presence of a single goal — the directed introduction of money into the legal economic circulation,” the expert specified.

In April, a court in Novosibirsk began to consider the first criminal case in Russia on the appropriation of assets of a cryptocurrency exchange. The defendant in the case is a former system administrator of the WEX platform. The amount of damage exceeds 3 billion RUB in cryptocurrencies.

And in May last year, the court of St. Petersburg, during the consideration of the extortion case, for the first time recognized cryptocurrency as a means of payment.