FATF “Sanctions” Ukraine

“In addition to the current application of recommendations, the FATF (Financial Action Task Force on money laundering — Ed.) members will impose countermeasures on Ukraine.” This verdict reported December 20 at 2 p.m. on the official FATF website (www1.oecd.org/fatf) ruffled official and business Kyiv. The Ministry of Finance State Secretary in charge of financial monitoring turned out to be “out of reach” for many. National Bank experts “studied the situation in the Internet.” Premier Viktor Yanukovych said the government intended “to enter into a dialog with the FATF” to find out the procedure of sanction lifting. The Association of Ukrainian Banks “knew about the imposition of sanctions” and “was extremely worried over this.”

The official FATF standpoint is: “the decision has been made because Ukraine failed to pass a law on combating money laundering in line with international standards. The Law of Ukraine of December 7, 2002, ‘On Preventing and Countering the Legalization (Laundering) of Criminally-Earned Incomes’ does not remove the main drawbacks that were pointed out...”

There is a good reason to think why, after the FATF had made a number of warnings, Ukraine never approved a law which could satisfy the intergovernmental organization. Den wrote on December 5, 2002, that “the Paris pilgrimage” coupled with the Law to be passed on December 7 make it impossible for our delegation to prove that Ukraine is not a Nauru but a state that cooperates in combating money laundering.

The forecasts have come true. It is Nigeria (also facing sanctions previously), not Ukraine, that turned out to be “not a Nauru.”

Now all this country’s financial institutions can do is wait and see in what form and by which states these sanctions will be imposed. It will be recalled that the intergovernmental organization on combating money laundering includes 29 countries of the world: Argentina, Australia, Austria, Belgium, Brazil, Canada, Denmark, Finland, France, Germany, Greece, China, Iceland, Ireland, Italy, Japan, Luxembourg, Mexico, the Netherlands, New Zealand, Norway, Portugal, Singapore, Spain, Sweden, Switzerland, Turkey, the United Kingdom, and the United States.

According to The Day’s information, many of the above-mentioned countries opposed the imposition of sanctions at the latest FATF session. It is known for sure that Italy and Brazil had earlier announced they would not impose countermeasures on Ukraine. As we were going to press, we received information that the US intended “to sanction” Ukraine. Some sources close to the Cabinet do not doubt that Britain and perhaps Germany will follow the US suit but do not know in what way. Incidentally, countermeasures may differ. The final declaration of the Conference of European Union Parliaments against Money Laundering Final declaration of the Conference of European Union Parliaments against money laundering of February 8, 2002, states in no uncertain terms:

— Strengthen the obligations of financial agencies to identify economic beneficiaries before establishing relations with individuals or entities in the “non-cooperating” countries and territories.

— Strengthen reporting mechanisms or provide for a systematic report to the financial intelligence unit of financial transactions with these countries and territories.

— Impose conditions on, restrict, overtax or ban transactions with individuals or entities located in these countries and territories.

— Ban European Union member country institutions from opening subsidiaries, branches, or representative offices in these territories or from holding the accounts of correspondents there.

— Ban financial institutions whose head office is located in one of these countries or territories from opening subsidiaries, branches, or representative offices in the European Union or from holding the accounts of correspondents there, etc.

Latest information says the FATF proposes to impose “gradual, proportional, and flexible” countermeasures on Ukraine. This is perhaps the result of the letter Premier Yanukovych sent to Paris (FATF headquarters) shortly before the sanctions were imposed, in which he requested to defer the sanctions until February. The FATF took into account this request, announcing that it was imposing countermeasures and expressing a hope that “Ukraine would properly address” the problem of its laws. In this case it will be easier to raise the question of lifting the sanctions against our state in February, again in Paris.