Ukraine crisis casts cloud over Moscow anti-money laundering meeting

WASHINGTON, March 19 Wed Mar 19, 2014 4:56pm EDT

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WASHINGTON, March 19 (Reuters) - Russia's takeover of Crimea and the ensuing East-West crisis have cast a cloud over a meeting of top international anti-money laundering officials scheduled to take place in Moscow in June.

The meeting of the Financial Action Task Force, bringing together chiefs of government "financial intelligence units" set up to spot and crack down on illicit financial transactions, is slated to be held in Moscow from June 16 to 20.

For now, no plans appear to be in the works to cancel or move the meeting. The world's seven leading industrial nations, including the United States, have suspended plans to participate in another meeting scheduled in Russia, the G8 summit that had been due to take place in Sochi in July.

Because it is made up of law-enforcement and financial officials, FATF and its members are supposed to operate above national or international politics and avoid being influenced by foreign policy developments.

However, some sources inside the organization are voicing concern that given Russia's recent moves to annex Crimea from Ukraine, holding a conclave of senior international anti-money laundering investigators in Moscow would send the wrong political and diplomatic signals.

One FATF source said that "many people" inside the group are "not at all happy" with the notion of holding the meeting in Moscow in light of recent events.

U.S. Treasury Department officials declined to comment on the scheduled Moscow meeting. The State Department also had no immediate comment.

However, a senior U.S. official, speaking on condition of anonymity, told Reuters: "It's safe to say that the immediate future of cooperative meetings such as the FATF summit and the G8 are under discussion."

Juan Zarate, a former Treasury and White House official during the administration of President George W. Bush, wrote in a recent book, "Treasury's War," that Russian President Vladimir Putin had been keen on having Russia join FATF to demonstrate its legitimacy in the international financial world.

Zarate now thinks the Moscow venue for the June meeting is problematic. "This issue will create a thorny dilemma for the Administration at a time when we are trying to isolate Russia financially and may decide to target Russia with the taint of illicit finance," he said via email.

Another former Treasury official who handled anti-money laundering issues under Bush, Jimmy Gurule, said FATF member states should not participate in the meeting.

"The invasion of Crimea is a blatant act of aggression, a serious crime under international law. Russia should not be rewarded for (Putin's) criminal acts by being permitted to host a plenary session of FATF," said Gurule, now a law professor at the University of Notre Dame in Indiana.

"The event should be boycotted by the FATF member states. At a minimum, the Obama administration should prohibit the U.S. delegate to FATF from traveling to Moscow and participating," he said.

Russia, once blacklisted by FATF for its lack of anti-money laundering laws, later joined the organization. It holds FATF's rotating chairmanship, which is why the June meeting is set for Moscow.

Russia's anti-money laundering compliance record has improved gradually since it joined FATF.

A 2008 FATF assessment found that Russia, while mostly in line with the group's standards, needed to increase the number of investigations and prosecutions for money laundering and terrorism financing, and give supervisory authorities more power to place sanctions on people who do not comply.

For example, at the time Russia did not prohibit criminal ownership of financial institutions. Russia also needed to be more transparent about who had a controlling interest in companies and banks, and not allow people to open bank accounts anonymously or with made-up names, the assessment found.

But in October, FATF determined that Russia had done enough to improve its deficiencies, and regular follow-up was no longer required.

The U.S. government's financial intelligence unit is a U.S. Treasury office called the Financial Crimes Enforcement Network, or FinCEN.

It and other financial intelligence units police the financial world by requiring financial institutions to routinely notify them of relatively large, or potentially otherwise suspicious, transactions. (Editing by Warren Strobel and Mohammad Zargham)

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