What Lessons Should Ukraine Draw from the FATF Sanctions?
At the February 12 — 14 session of the Financial Action Task Force (FATF) in Paris everything turned out well for the Ukrainian delegation. FATF experts did justice to money laundering legislation enacted in Ukraine and lifted sanctions imposed late last year. As Premier Yanukovych told a press conference in Zaporizhzhia, from now on the government will closely follow FATF instructions to avoid sanctions in the future. Before long, FATF experts will come to Ukraine to check the efficiency of the financial monitoring system in practice. If they are satisfied, Ukraine will stand a good chance of being removed from the FATF blacklist by year’s end. If not, Ukraine could be threatened with sanctions again. To quote First Vice Premier and Finance Minister Mykola Azarov, by June (when the FATF will meet again) the staff of the “financial intelligence service” in Ukraine will have increased fivefold up to 60 officers. Will quantity translate into quality in this case? And how will this service operate with a shadow economy growing on a par with GDP? What should be taken into account in our country that successfully endured sanctions and willy-nilly enacted money laundering legislation? turned to experts for answers to these questions .
Viktor SHEYBUT, supervisor of a team of aides to the First Vice Premier and Finance Minister of Ukraine:
A major lesson for Ukraine is that we should play fair. After all, Ukrainian businessmen engage in money laundering schemes abroad. Thus if the national businesses break with the old habits and honor their commitments to foreign investors, there will be no need to launder dirty money. The government, in its turn, should declare a tax amnesty. This step will allow businesses to turn over a new leaf and reflect the actual figures in their tax declarations. Only in this way can taxpayers be prevented from doing business off the books. I believe the tax amnesty will be declared and all gains, except for those from illegal trade in antiques, arms, drugs, etc., will be legalized. This done, we will be able to effectively monitor and keep money laundering in check. We also should not forget about the systemic tax reform and easing tax burden on small and middle-sized businesses. These should be set free altogether. Simultaneously, we should foster tax culture among businessmen. That’s where the enacted money laundering legislation, thanks to which the FATF lifted its sanctions, will come in handy. Personally, I think that by this December, Ukraine will be removed from the FATF blacklist.
Oleh ANDRONOV, Board Chairman of the Ukrainian Interbank Foreign Currency Exchange:
I believe that FATF sanctions had not been brought on by the fact that dirty money is laundered in Ukraine and that our state is one big “washing machine.” Regrettably, our money laundering laws took quite long to be adopted. It does not take an expert to see that the required laws were long overdue. In all probability, this is where we went wrong. After all, there were no grounds for sanctions, that is to say, no proof that money laundering was rampant in the Ukrainian banking system. By contrast, scandals with Western — and not only offshore — banks are public knowledge. However, sanctions were imposed on Ukraine and this is quite understandable, considering the shortcomings of the laws we used to have. And the fact that it took the Verkhovna Rada so long to pass the required laws should teach us a good lesson. Though, by all accounts, scores of laws, which are much more important for the economy than the law On Countering Money Laundering, still await parliament consideration. As for the sanctions themselves, it is a good thing they have been lifted, since they could have had grave consequences, as foreign banks began stopping bank transfers involving Ukraine. This could make export- import payments very complicated and thus affect our economy. Now we had better concentrate our efforts on adopting laws that would be more useful for the economy. As for fighting money laundering, I will reiterate that it will not benefit the Ukrainian economy, since “dirty” money in the classical sense of the word is not laundered in Ukraine. However, currently the state has all the instruments to press ahead with the civilized implementation of the law On Countering Money Laundering. I hope the right political conclusions will be drawn from the FATF affair and Ukraine will be removed from its blacklist. I also hope that the fight against money laundering will not lead to abuse of power in Ukraine.
Kseniya LIAPINA, expert of the Institute for a Competitive Society, Analytical Group of the Coordinating Expert Center of the Association of Ukrainian Entrepreneurs:
The FATF sanctions affair has left many unanswered questions as regards the country’s foreign political activity. I believe that FATF sanctions were not so much due to shortcomings in legislation but rather to the fact that Ukraine failed to convince the world community that dirty money is not laundered in our unfledged banking system. I wish our officials’ understanding of dirty money would match the European concept. Since very few took notice of the fact that Ukrainian legislation had previously foreseen responsibility for legalizing ill-gotten gains. The adopted law On Countering Money Laundering is quite ambiguous in this respect and at this point it is essential that undeclared income not be considered dirty money. However, Ukraine was given to understand that it should follow the instructions of international and intergovernmental organizations in good time. This is the main lesson.
Second, few question the fact that the FATF affair had more political rather than economic reasons behind it. It was not a problem of banks and businesses. It was a problem of the Ukrainian power that is not trusted in the world. As one foreign analyst told me, “Though rubber stretches well, it will snap at one point.” Ukraine is approaching this point, exhausting the patience of the world community. FATF sanctions only aggravated the situation and to a great extent because of the unclear policy pursued by Ukraine.
Put simply, the fight against money laundering means additional work for banks. Frankly speaking, it will only incur them additional expenses. In the near future the FATF will monitor the implementation of money laundering laws in Ukraine. Whether this will prevent our power from abusing these laws is anyone’s guess. I would not be too optimistic about it.
