FATF representative tells Kyiv international sanctions will be lifted (02/16/03)

FATF representative tells Kyiv international sanctions will be lifted

by Roman Woronowycz
Kyiv Press Bureau

KYIV - Germany's Ambassador to Ukraine Dietmar Steudemann told journalists in Kyiv on February 12 that restrictions imposed against Ukraine's banking sector for not meeting international anti-money-laundering requirements would be lifted very shortly.

"Ukraine has successfully implemented FATF requirements and will have restrictions that were imposed against it removed," said Mr. Steudemann.

The German ambassador spoke as representatives of 27 countries of the Financial Action Task Force (FATF), an international agency that monitors financial transactions and money-laundering schemes, met at a Paris summit. Part of the summit's agenda was dedicated to considering whether Ukraine had met standards developed by the West to make international currency transactions more transparent and thus less prone to illegal laundering. Germany currently chairs the FATF.

Most of the 27 member-states (and two international organizations) of the FATF placed sanctions on Ukraine in mid-January after the Verkhovna Rada failed to meet deadlines to pass legislation on additional banking laws and criminal penalties specifically aimed at stemming money-laundering operations in Ukraine. The FATF wanted legislation to force Ukrainian banks to reveal the names of all clients who made international transactions and to level specific criminal penalties for money-laundering infractions.

The FATF sanctions limited the amount of money that a Ukrainian bank could send to a financial institution of an FATF member-state to 15,000 euros ($16,000) per transaction. Great Britain, however, announced that it would impose harsher measures and block all financial transactions with Ukrainian banks. In December Washington had said it would limit banking transactions with Ukraine to $50,000 and would scrutinize the accounts of all Ukrainian account holders in U.S. banks.

The limits curtailed the business activities of many Ukrainian companies that rely on Western goods. Kyiv feared that sanctions, if imposed for a lengthy period, could have damaged the economic growth the country has experienced in the last few years. It made a major public relations stir after additional money-laundering legislation was finally enacted and then sent First Vice Prime Minister Mykola Azarov to Paris at the head of a delegation to press Kyiv's claim that it had done all that had been required.

Speaking to journalists on February 4, President Leonid Kuchma admitted that in the case of the FATF sanctions, Ukraine could not claim that the sanctions were simply more anti-Ukrainian discrimination on the part of the West, as the country has been prone to do when it has found itself the object of Western scorn in the past. Mr. Kuchma admitted that the Verkhovna Rada had plenty of time to avert the banking crisis.

"We are at fault because we did not pass the required legislation," acknowledged President Kuchma. "We turned an economic and financial problem into a political crisis."

FATF had warned Kyiv that it needed to change its banking laws and develop money-laundering legislation in September 2001 and gave the country a year to do so, during which it placed Ukraine on a watch list of countries that did not meet FATF requirements. A year later the Ukrainian legislature still had not fulfilled FATF demands. The Verkhovna Rada then asked for an extension and promised that it would have the required laws on the books by mid-December.

Legislators passed an initial anti-money-laundering bill on November 29, 2002 which President Kuchma signed into law on December 7, but the FATF decided that the legislation did not meet Western standards. On January 16, as the FATF announced it had lost patience with Ukraine for failing to live up to its promise, Kyiv officials scrambled to avert the imposition of limits on financial transactions with FATF members.

By February 6 the Verkhovna Rada finally passed the last piece of legislation, which outlawed anonymous bank accounts, forced banks to identify all clients who performed banking transactions exceeding 50,000 hrv (approximately $9,400) and required monitoring of any accounts of more than $15,000 euros.

Yet, even after the FATF lifts the sanctions, (the official decision was scheduled to be announced on February 14) Ukraine will remain on the watch list of countries for sometime. How long remains a matter of debate. While U.S. Ambassador Carlos Pascual stated that FATF would monitor Ukraine for a year, recently appointed National Bank of Ukraine Chairman Serhii Tyhypko said he expected the country to be off the "black list" by June.

While Mr. Steudemann, the German ambassador, did not offer his own timetable, he said it would depend on how Ukraine implements the legislation it had passed.

"I want and hope that the last step would be taken, and Ukraine will be removed from the so-called black list," said Mr. Steudemann. "However, more steps are needed for this and Ukraine should understand very well that monitoring will continue because laws are one thing and actions are another."

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