Comment: Sanction Russia as the terrorist state it’s become
Published 1:30 am Saturday, October 29, 2022
By Igor Cherkaskyi / Bloomberg Opinion
As of this writing, Russia continues to bomb my country, my city Kyiv, and the streets, parks and central squares I used to walk with my children. The goals are far from military; Russian rockets deliberately target civilians to strike fear into the hearts of Ukrainians and doubt into the resolve of our allies. At the same time, the Russian leadership continues to threaten the world with nuclear warfare.
These activities amount to terrorism; and should be dealt with as such.
The international community has developed mechanisms for dealing with rogue states that support terrorism and embark on dangerous nuclear weapons programs. These are based on comprehensive economic sanctions that undermine terrorists’ ability to raise funding, greatly reducing their capacity to cause harm. While ideology and naked self-interest are the causes of terrorism, money is its lifeblood.
North Korea and Iran, for example, have both faced sanctions for the financing of terrorism and the proliferation of weapons of mass destruction. They have been deemed high-risk jurisdictions and “blacklisted” by the Financial Action Task Force (FATF), the global money laundering and terrorism financing watchdog set up by G7, which now includes 37 member states. This is one of the most effective tools for restricting terrorists’ access to the global economy, as it forces all states to apply enhanced due diligence to any transactions involving the financial system of a blacklisted jurisdiction.
Aside from being blacklisted by FATF, North Korea and Iran have something else in common. They have forged ties with Russia and, in some cases, been supported by Russian actors in their terrorist endeavors.
In March 2022, the U.S. sanctioned Russian individuals and entities that allegedly supported the weapons of mass destruction and ballistic programs of North Korea. It has also been reported that Russia was buying ammunition from North Korea.
Iran and Russia have drawn closer too since the full-fledged invasion of Ukraine. Russia has been buying Iranian kamikaze drones and using them to attack Ukrainian civilians and critical civilian infrastructure. Many of these have been downed in Ukraine and are proof of Russian cooperation with Iran.
Again and again, Russia has failed to prevent the financing of terrorism and nuclear proliferation. It is also well known for its kleptocratic regime thriving on money laundering and illicit finance generation.
Although existing sanctions have made a difference, the war continues to drag on and global threats emanating from Russia are increasing. Not since the darkest days of the Cold War has the risk of nuclear war felt so real. It is time the international community acknowledges this and addresses Russia as the terrorist state it has become.
In June, FATF took an important step with the decision to suspend Russia’s decision-making powers within the organization. Now more must be done.
This week we have a chance to further increase pressure on Russia. Today and Friday, the FATF plenary meeting takes place in Paris. Ukraine’s request is clear: Exclude Russia from FATF and blacklist it for the safety and security of not just Ukraine but the world and the global financial system.
These steps would protect lives in areas far beyond Ukraine. They would necessitate immediate compliance with more robust anti-money laundering and anti-terrorist financing requirements when dealing with Russia. This would add another major disincentive for international business to operate in the Russian market and limit Russia’s access to the global economy.
At present, only a limited number of states participate in sanctioning the Russian regime for its gross violations of the international rule of law. FATF blacklisting would compel all actors from all jurisdictions around the world, besides those on the FATF blacklist such as Iran and North Korea, to comply or risk being called out for facilitating terrorism financing and money laundering.
Such a step will close off some of the main loopholes for sanctions circumvention. For example, it would eliminate the safe havens provided by Russia’s existing unsanctioned banks. From more than 300 Russian banks, only around 20 have been sanctioned. It would also prevent possible circumvention through those states that have not introduced sanctions against Russia.
Together, these moves would help choke Vladimir Putin’s ability to finance the war.
But we should think bigger too. By designating Russia as a high-risk jurisdiction, we will strengthen the entire global financial system. While many understand the risks posed by Russia already, many others continue to covertly support the state or continue business operations there. Officially blacklisting Russia will mean those actors must comply or risk violating existing anti-money laundering and anti-terrorism financing regulations.
Early sanctions and the scramble by Russian elites to protect their assets revealed the extent to which Russia’s high level of corruption has been exported worldwide. Indeed, the invasion of Ukraine has forced Western financial centers to address risks associated with Russian money urgently.
By uniting to further close Russia out of the global economic and financial system, we send a clear message that actions that threaten global security will not be tolerated; and that violators, no matter their size or importance, will be held accountable.
Igor Cherkaskyi is the head of the Financial Intelligence Unit of Ukraine.
