FATF to Review Ukraine’s Plea to Blacklist Russia

The Financial Action Task Force (FATF) is a global organization that establishes AML/CFT guidelines for countries and oversees compliance with them. It is reportedly considering placing Russia on its “Blacklist” following Ukraine pressure.

FATF will examine Russia’s operations related to “digital currencies”  and other AML regulations in an upcoming meeting planned for 21-25 October 2024.

Campaign Led by Ukraine

As per media sources, the Financial Action Task Force (FATF), an intergovernmental organization in Paris, is planning to make a decision on Tuesday related to Russia at the request of Ukraine.

Ukraine requested to add “Russia” to the FATF Blacklist. Two months after Russia’s invasion, Ukraine initially asked to label Russia as a “high-risk jurisdiction” in April 2022.

Reasons for Potential Blacklisting

According to the dossier submitted to the FATF, the reasons for Russia being added to the FATF’s blacklist are

• Russia financially supports “North Korea and Iran” and assists in their military operation as well; these two countries are already on the blacklist of FATF.
• Russia’s government is also accused of funding “mercenary organizations, such as the Wagner Group.”
• The report highlights that Russia is illegally transferring funds obtained from “stolen goods” in the Ukraine War. Thus, it is involved in money laundering.

FATF’s Stance on Russia’s Aggression

FATF has announced publicly that Russia’s aggressive behavior can’t be accepted, referring to its actions towards Ukraine and mentioning it’s against the “core principles” of the organization.

However, all the countries which are members of FATF need to be agreed to blacklist “Russia.”

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Consequences of Blacklisting

In  February  2023, FATF suspended Russia from member lists. Blacklisting of Russia will result in restricted money transfers and its access to financial markets. Any financial transaction with Russia would be considered high risk, as would North Korea or Iran.

The report states, “Being placed on a FATF black or grey list can severely damage a nation’s financial reputation and is seen as economically ruinous for most states.”

Rosfinmonitoring Defends Its Digital Currency Regulations

The financial watchdog of Russia, “Rosfinmonitoring,” has argued that the current AML framework is strong enough for the regulation of digital currencies as compared to the past.

As Law enforcement bodies have imposed new AML laws that counter the highlighted concerns of FATF about weak regulations, The regulator kept mentioning that there is nothing wrong in the AML framework to justify blacklisting Russia.

Rosfinmonitoring kept its confidence about its AML regulations, stating that it had no “strategic shortcomings.” Regulators highlight AML deficiencies as a critical factor for countries that add to the blacklist.

It is assured of having a robust AML framework and about recent regulatory efforts related to the “regulation of digital currency.”

As per the media sources, Russia is already struggling with sanctions and issues in the financial market. Blacklisting will negatively impact its economy and disrupt financial stability. However, its regulator is confident about recent improvements in anti-money laundering (AML) regulations regarding digital currency and efforts to combat financial crimes.

The upcoming session will decide whether the measures are effective and meet the requirements of FATF.