Who is Who in Financial Intelligence?
A financial intelligence service has been formed in Russia under President Putin’s decree. Officially known as the Financial Monitoring Committee, it is meant to trace large remittances abroad. If in doubt, FCM analysts will alert law enforcement authorities and they will investigate the transaction. The FCM is subordinated to the Russian Ministry of Finance and headed by First Deputy Minister Viktor Zubkov. The latter says that financial intelligence will begin work in February 2002.
Russian experience is likely to be useful for Ukraine. At its November 1 meeting, the Financial Action Task Force (FATF) set up by the G-7 announced that Ukraine has no effective means of combating money laundering. In September, Ukraine was listed with nine other countries offering the least resistance to this ill. In late October, President Kuchma declared his intention to organize a special agency to combat money laundering that would collect data relating to suspicious financial transactions, notify law enforcement authorities of financial crimes, and exchange information with international structures hunting for dirty money. Forming this agency is slowed down by the confusing issue of subordination, as the NBU, Tax Administration, and Finance Ministry all want to be in charge of this Ukrainian financial intelligence service.
Incidentally, the bill On the Prevention of and Resistance to the Legalization (“Laundering”) of Illegal Incomes materialized in Ukraine long before Russia started speaking publicly about the need to organize a financial intelligence service in mid-2000. But the then Premier Viktor Yushchenko, as a true financier, was very suspicious about the idea of an agency entitled to collect data relating to all bank accounts registered in Ukraine. He believed that such an agency, if and when established, should take orders only from the National Bank of Ukraine, which was already daily monitoring the entire system of payments. Pressed by the president, the bill was submitted to Verkhovna Rada, but Yushchenko never signed it. Yury Yekhanurov, then First Vice Premier, did.
The parliamentary finance committee says the financial intelligence bill will be considered in parliament by the end of November. The finance and banking committee has studied it and given it overall approval. The only debatable aspect is the new authority’s subordination to the Tax Administration. Tax chief Mykola Azarov is also the leader of a party actively involved in the parliamentary election campaign. Who can guarantee that confidential finance data will not be used in business and political competition? No one as yet. Many Ukrainian banks and businesses have long been known to have offshore accounts. Naturally, lawmakers fear that the tax people will use money-laundering intelligence for specific purposes, and that such information will be made public knowledge in a very discriminating and purposeful manner.
The Finance Ministry and NBU, vying for financial intelligence control, are likewise not trusted overly much by parliament. At present, the ministry and the national bank are headed by bureaucrats sufficiently above the political fray, but it is anyone’s guess what will happen after both are replaced. This makes it safe to assume that the bill will not be actively supported by our lawgivers. Its deliberation is likely to be drawn out for months and the vote will not be positive. If the president is interested in having financial intelligence before the election, he is within his right to sign an order to this effect. But parliament will surely lash out at the chief executive and the new agency’s performance will first be made to look politically biased.
The problem could be solved by making financial intelligence an independent agency under public control of some sort of supervisory board. In that case, financial scouts would be in a position to trace down remittances involving governmental figures, including (God forbid) someone high in the Tax Administration leadership, Finance Ministry, and NBU. Under the circumstances, however, the whole idea looks like yet another of many being long and heatedly discussed in the corridors of power. It means that Ukraine can at best expect information from the Russian financial intelligence service which, under Putin’s edict, is empowered to monitor money flows abroad, including Ukraine.
