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Stand up and be counted

Stand up and be counted
‘Stand with Ukraine', by Domenico Cava. www.domenicocava.com

Should Russia be expelled from the FATF?

Ukraine-based Evgen Vorobyov recently launched a campaign to have Russia removed as a member of the Financial Action Task Force. Lynn Sheehan speaks to him about the campaign’s aims.

The last time I met Evgen Vorobyov was back in 2019, when we were working together for an EU mission in Kyiv. At that time, Evgen was a part-time activist on many issues, particularly in the financial sector and on human rights, and was also working full-time as an analyst.

Stand up and be counted
Firefighters at a destroyed apartment building in Kyiv, Ukraine

Stand up and be counted
Evgen Vorobyov

When we met, he was heading off to pursue a master’s in financial law at Leiden University and had just been awarded a prestigious scholarship to continue his studies. That was almost three years ago. Times have changed dramatically since then, and the challenges Evgen and his country face have become so different and so much more significant.

“After graduating from Leiden, I returned to Ukraine to join the public service as an expert at our central bank, where I helped draft several crucial laws and regulations to bring our legislation closer to EU standards,” says Evgen.

“Later I moved to consulting. But when Russia started its full-scale war of aggression against Ukraine in February this year, these narrow professional goals became quite irrelevant. That is why I switched to civic causes. The biggest priority for me now is to make sure that Russia – a country that has shown complete contempt for international law – is excluded from the benefits of global finance.”

War of aggression

Evgen’s new initiative – ‘No Finance for Russia’ – involves a petition to get as many signatures as possible to have Russia removed as a member of the Financial Action Task Force (FATF).

“I am talking to you, sitting just about 100km from the frontline,” says Evgen. “Going to a shelter when an air-raid siren sounds is part of my daily routine – I do that several times a day. But, even worse, there is a constant stream of news about my fellow citizens who are killed, maimed, and deported by Russian troops. Even though the Ukrainian armed forces continue to fend off Russian military attacks, Russia perpetrates heinous crimes against civilians in Ukraine.

“Our initiative reaches out to the international public and politicians to explain why Russia can no longer be allowed to use Western financial infrastructure to continue its war of aggression.

“The Financial Action Task Force is an international organisation that has 39 members, mostly large, developed economies. They basically decide what rules jurisdictions across the world have to put in place to prevent money-laundering, financing of terrorism, and financing of weapons-of-mass-destruction proliferation.

“Perhaps surprisingly to many people, Russia is still part of that elite club – I would argue, mostly as a relic of the times when Western countries thought that they could entice Russia to live by the rules of international law,” Vorobyov says.

Regulatory wisdom

“Before the war, my colleague and I worked as consultants on a project to improve anti-financial-crime institutions in Ukraine, and FATF standards are like a bible to us – lengthy and written in bureaucratese, but full of collective regulatory wisdom amassed over the years.

“After Russia started its brutal war against Ukraine, we saw a number of international organisations condemning and expelling Russia from their membership. I think that Russia’s war of aggression has really created huge public pressure on all organisations where Russia was a member. But it turned out that FATF was not one of the organisations that spoke out in unequivocal terms, let alone took swift action to change Russia’s status in that organisation.

“In fact, FATF’s statement at the beginning of March showed that they were still sitting on the fence, sort of hoping that the problem would go away. That is when my colleague and I decided that we had to bring this issue into the court of public opinion and start an international petition.”

Exclusion from FATF

So how exactly would removal from FATF negatively affect Russia? What would be the specific impact?

“Russia’s exclusion from the FATF and its ‘blacklisting’ would not be a mere symbolic gesture – it would make life much worse for Russian banks and companies that, either directly or indirectly, help bankroll Russia’s war effort here in Ukraine. This step would also mean that there would be significant additional controls of foreign banks and other financial institutions when dealing with any entities in Russia, which would hit foreign direct investment and trade.

“For example, after Iran was blacklisted by FATF in 2020, its foreign direct investment fell by about 20%, and its export of goods and services by 30% the following year. The effect for Russia would be much worse, as it is more dependent on the global financial system.

“Last, but not least, Russia’s exclusion from FATF would mean that it would not be able to have an impact on the emerging rules on new financial technologies (such as virtual assets), which goes against the recent attempt by Russia’s central bank to clamp down on [limits regarding] such technologies.

“Needless to mention, Russia, in our opinion, has no business establishing rules on countering terrorism financing with crypto-assets when it engages in terrorism against the civilian population here in Ukraine.”

Will it make any difference?

Given that FATF is a standards-setting body focused on preventing money-laundering, terrorism financing, and proliferation financing, why would it act on the aims of a public petition?

“I think that we should not underestimate the power of public opinion, the power of civic pressure,” Vorobyov argues. “All institutions, including the FATF, derive their raison d’etre from public expectations of what societal problems should be solved, and how they should be solved. And when those public expectations do not align with an institution, then the onus is on the institution to explain why that is the case and, if necessary, to make amends.

“I think that the Ukrainians’ fight against Russia’s aggression is just another reminder of how ordinary people can bravely stand up for what is right, even in the face of a tremendous threat.

“For me, as a person who has worked for an international organisation, the issue is about the accountability of international institutions. These institutions have a clear mandate that they have to serve, and it is sometimes quite easy for people in those institutions to hide behind the technicalities of that mandate.

“Alas, two months after Russia started this invasion, the FATF members’ ministers failed to take any meaningful action at their biennial meeting on 21 April, even though the meeting was about establishing the FATF’s strategic direction.

“But an international organisation should also come back to basics once in a while and look at the big picture: is our conduct now in line with what we preach? I believe that we are now in exactly such a situation, and we – here in Ukraine and in Ireland – have to signal that the approach of international institutions towards Russia has to change dramatically.

“We know that FATF talks about a ‘risk-based approach’ to preventing money-laundering and terrorism financing, so the organisation should also follow the same principle in deciding whether Russia can still benefit from the global financial system. And the clear answer to that question for us is ‘no’.”

Responding to the call

Three broad groups of signatories have responded to the call to sign the petition, Vorobyov says.

“The first group – which comprises 150 signatories – is made up of international experts with significant expertise in international and financial law, countering financial crime, public policy, and human rights. For example, Natalie Jaresko is a Ukrainian-American stateswoman – one of the architects of the Ukrainian reform of the financial sector after Ukraine’s ‘Revolution of Dignity’ [the Maidan Revolution].

“We have a member of the Dutch parliament with deep expertise in investigating and prosecuting money-laundering. We also have Timothy Ash and Anders Aslund as signatories – renowned economists with deep knowledge of both Russia and Ukraine. In my policy work, I was lucky to work with dozens of brilliant professionals, and I feel privileged to see such stellar names supporting our cause.

“We also have dozens of signatures from anti-money-laundering professionals from large Western banks. And it was, in a way, a bit of a surprise for me, because I thought that such people would be more reticent and reluctant to speak out publicly, but that is not the case when you look at the signatory list. It is signatures from such people that should send a clear signal: this petition’s demands are also shared by people from the private sector who want to help make the global financial system work better. That signal is incredibly powerful.

“The second group of signatories – employees of Ukrainian governmental institutions who have a role in preventing financial crime – is quite important, because it shows that they seek a more honest playing field for their country. These people – among them deputy ministers and judges – believe that such an authoritative institution, such as the FATF, should side with the rule of law and fairness, and that is why they signed this petition.

“As someone who has previously worked with many reform-minded civil servants in Ukraine, I know that these officials expect international institutions – like FATF – to deliver on the principle of the rule of law when it comes to holding Russia accountable for its illegal actions.

“And the third group includes people who do not have an immediate connection to policy work or governmental institutions. I am quite proud that we have managed to collect over 3,000 signatures from the general public. I doubt that many of these people, in Ukraine and in 50 other countries, knew much about FATF and its role in terms of Russia. And, in that sense, we have also promoted FATF’s mandate, so to speak.”

Current status

Vorobyov’s campaign wrote to the FATF president on 25 March to notify him of the petition’s demands and to urge him to respond within a month, and the president’s office has confirmed the receipt of this letter. The campaign also communicated their demands to the heads of delegations at FATF, including Ireland’s head of delegation (who has also confirmed receipt of the letter).

“These are the official representatives of 38 countries and intergovernmental bodies that are FATF members (bar Russia, of course),” Evgen explains. “We are now also communicating with senior politicians in those countries and in the EU institutions to persuade them that delivering on the petition’s demands is the right thing to do, so that those politicians hold their governments accountable for their stance on Russia’s membership and status at FATF.

“I, for one, hope that politicians will listen to our arguments and do what they are supposed to do – hold institutions like FATF accountable for their response to the biggest international issue on the agenda.

“I urge the Gazette’s readers to sign the petition. It is essential that more legal and financial professionals step forward with their names and affiliations, and show that they are not comfortable with the fact that a country, such as Russia, is shaping the rules for countering terrorist financing and money-laundering for the financial world. We will be keeping the petition open until the FATF delivers on all the demands in the petition. The petition can be found at no-finance-for-russia.com.”

Lynn Sheehan is a solicitor from Cork currently working at EUCAP Sahel Niger. She conducted this interview in a personal capacity, and any views expressed in the article are the participants’ own.

Read and print a PDF of this article here.