The Financial Action Task Force (FATF) is reportedly considering whether to place Russia on its blacklist next week, according to Politico. The move comes amidst growing pressure from Ukraine for the Paris-based agency to crack down on Moscow. Being added to the blacklist can significantly damage a nation’s financial reputation, as it signals problems with the rule of law and discourages foreign investment.
The FATF is an international organization whose mission is to counter money laundering, financial crime, and the financing of terrorism. Its members are set to convene on October 22 to discuss potential action against Russia at Ukraine’s request, as reported by Politico on Tuesday.
In April 2022, shortly after the outbreak of the conflict in Ukraine, Kiev approached the FATF with a proposal to designate Russia as a high-risk jurisdiction. Since then, Ukraine has been continually pushing for Moscow’s downgrade, submitting new evidence to support its case. However, so far, the organization has refrained from including Russia on its black or gray list.
One of the reasons cited by Ukraine for blacklisting Russia is the close cooperation between Moscow and blacklisted countries such as North Korea and Iran. Additionally, the country claims that Russia funds private military companies like the Wagner Group and uses Telegram Messenger and cryptocurrencies to finance terrorism and engage in money laundering.
Any decision by the FATF to take action against Russia would require a consensus among its member states, which include China, India, Brazil, and South Africa – all of whom are crucial trade partners for Russia. The situation has been further complicated by recent corruption scandals involving high-ranking government officials in Ukraine, with the US Department of Defense Inspector General Robert Storch acknowledging the country’s longstanding issues with corruption last month.
In June, the European Commission established a watchdog to monitor and prevent the embezzlement of billions of dollars in EU funding allocated to Kiev as part of the bloc’s plan to finance Ukraine in its conflict with Russia. As the FATF mulls over whether to blacklist Russia next week, it remains to be seen how this decision will impact the ongoing crisis and global financial markets.