Law against money laundering must be passed before December 15

Ukraine remains on the blacklist of countries not doing enough to counteract money laundering. This was the decision published at the end of last week by the international group, the Financial Action Taskforce (FATF). Nevertheless, the FATF has refrained from implementing sanctions against Ukraine until 15 December 2002. Until this time the Verkhovna Rada has to consider and pass a law on the fight against money laundering, leaving the Ukrainian President to ratify it. (At the same time Russia, Nauru, the Dominican Republic, and the Marshal Islands are excluded from the blacklist as long as the FATF believes that these countries are taking serious steps to fight money laundering, including at the legislative level. “This is a great success for Russia and the international community in the fight against money laundering and financial terrorism,” said the President of the FATF Mr. Jochen Sanio). As for Ukraine, the verdict of the organization sounds much tougher in reality, than that which was stated to information agencies by the Ministry of Finance. And only with the last phrase is the burdensome impression produced by this decision softened somewhat: these countermeasures will apply to Ukraine after 15 December 2002, if it fails to bring its legislation into line with international standards.

The decision of the FATF in relation to Ukraine, which has recently made considerable progress in the matter of opposing criminal laundering, does not seem entirely appropriate at first sight. The General Prosecutor of Ukraine, Svyatoslav Piskun, speaking of the investigation into the Slovyansky Bank, noted that “We have come across the large scale laundering of hundreds of millions of US dollars from Ukraine to European countries for the first time.” At that he noted that his reports on this theme have been “printed several times by way of summarizing and using positive experience in the fight against money laundering and have been distributed among European law enforcement structures.”

Together with the practical fight against illegal laundering, in Ukraine intensive work is being conducted at a legislative level. At the beginning of October the Ukrainian President signed a law on the ratification of the international convention on the fight with financial terrorism. We remember that according to this convention, those financing terrorism are considered to be those who provide or collect resources with the intention of using them to carry out criminal acts (terrorism, seizing hostages, aircraft etc.), as well as other actions. The aim of this is the death of civilians not involved in military actions, intimidating a population, blackmail of governments or international organizations...

The states participating in the convention are cooperating in the sphere of the prevention of crimes. This includes changing the domestic legislation of a state; taking measures to ban illegal activities of organizations involved in terrorism on the territory of that country; requiring financial foundations and organizations to take measures to identify their clients and pay attention to unusual or suspicious operations and to inform the corresponding government organ of these operations.

Each state participating in the convention is taking all essential measures for determining, searching, and seizing resources used for the realization of these crimes.

But if the law is not implemented in a country, the active regulations of the convention, especially in certain financial operations, can clearly not act with full force. Thus the Ukrainian government submitted the draft law On Financial Control in Ukraine for consideration by the Verkhovna Rada (registered in parliament on 30 August and has had its first reading here). In the course of the discussion of this law the government agreed that in a bill to prevent and act against income laundering acquired through criminal activity, it is necessary to reduce the list of so- called ‘predicated crimes’, which precede money-laundering crimes.

At the same time, an active participant in government pressure on parliament, Finance Minister Ihor Yushko, noted that even if the law is passed promptly, Ukraine cannot be excluded from the blacklist at the next session of the FATF group. This, he claimed, was because according to current procedure, after passing, the law must be in force for a year, during which the FATF can implement monitoring of the document. However, Yushko expressed hope at that time that if the law was not accepted, the FATF would not undertake economic sanctions against Ukraine anyway, insofar as ‘there has never been such a precedent’.

Similarly, we went somewhat too far with promises that have led to the extremely unfavorable FATF decision against Ukraine. Right now even Oleksiy Berezhny, the chairman of Ukrfinmonitoring (as the department of financial intelligence of the Ministry of Finance is officially called) has declined to comment. Journalists are sent for them to the press service. Isn’t this evidence that if Ukrainian “financial intelligence” did not succeed in achieving favor of the FATF, it would be agreeable to divide responsibility for the possible sanctions with parliament?

This assumption can be confirmed, in particular, by the fact that accepting the decision about exclusion from the black list allows for the proposal of a particular sector, including banks and other financial establishments, as well as representatives from a series of professions; lawyers, accountants, and real estate traders.

Has the Ukrainian Ministry of Finance worked as well with them, while the Verkhovna Rada has put off voting about the bill twice since the beginning of September (in the second reading)? It seems that many voters would have wanted to hear FATF support in favor of Ukraine. In any case, the chairman of the observation counsel NRB Ukraine Bank Vyacheslav Yutkin told The Day, commentating on the present situation: “If they had consulted me about this cause, then I would have advised against leaving Ukraine on the blacklist. I believe that if laundering is present in Ukraine, then it is only on a very insignificant scale in comparison with Russia and other countries. In the last few years Ukraine should have done more in order to prove this and the decision doesn’t take into account all the practical and legal work. It’s another matter, that it stimulates impending parliament work in passing the appropriate law. At the same time such a decision is made null and void, while the adopted FATF measures don’t correspond with the real situation in Ukraine. Its threat to the world community is more far-fetched then real.”