- in Turkey
- with readers working within the Banking & Credit and Insurance industries
Syed Rahman and Ulrich Schmidt outline the reasons for the decision and its implications.
The European Union (EU) has added Russia to its list of countries that pose a high risk of money laundering and financing of terrorism - an action commonly referred to as blacklisting.
EU lawmakers had repeatedly called on the European Commission, the EU's executive body, to blacklist Russia. In response, the Commission said it would complete a review by the end of this year. This has now led to the decision to blacklist Russia, as well as to remove the United Arab Emirates and Gibraltar from that list.
It has been reported that assessing Russia's situation was complicated by a lack of information sharing with Moscow. But the Commission has stated that "this assessment concluded that Russia meets the criteria to be designated as a high-risk third country''.
Pressure
The EU already has in place sanctions against Russia that severely restrict Russian companies' access to EU financial services. But the blacklisting can be seen as a further increasing of the pressure on Russia. It comes as EU members are trying to persuade Belgium to drop its resistance to using revenues from Russian frozen assets as financial assistance to Ukraine.
The Financial Action Task Force (FATF), the inter-governmental anti-money laundering body, suspended Russia as a member after the full-scale Russian 2022 invasion of Ukraine. But it did not blacklist it, due to opposition from countries in the BRICS group of emerging economies; including Brazil, India, China and South Africa.
The EU's decisions are usually in step with those of FATF. But the EU now has its own Authority for Anti-Money Laundering and Countering the Financing of Terrorism (AMLA). This will contribute to the EU blacklist from July 2027.
Impact
This decision will have a large impact on Russian entities and any entities with links to Russia. Before this, sanctions targeted individuals and companies that were named in the EU's sanctions packages. Now, all EU-based bodies will be required to conduct much more stringent enhanced due diligence when transacting with any Russian company or citizen; including in situations when payments are routed through third countries or non-Russian entities.
This will substantially increase the amount of work required before companies can undertake such transactions. It could lead to a large increase in the number of businesses reluctant to cooperate with Russian entities.
This will not directly affect UK businesses, unless they have EU subsidiaries or operate through EU companies. But all EU-based companies that cooperate with Russian entities or individuals now need to immediately consider and review their anti-money laundering requirements in relation to such entities to ensure that they are meeting their obligations. They need to seek expert advice if they have any doubts about what steps they should be taking.
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