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Representatives of Kenya, Namibia, South Africa and the 17 other nations that comprise the Eastern and Southern Africa Anti-Money Laundering Group will gather in Lubango, Angola, on Friday for a weeklong meeting on efforts to clamp down on financial crime in the region.

The 16-page agenda for the biannual summit of the ESAAMLG, one of the Financial Action Task Force’s nine regional affiliates, is broadly mundane, with late payments of membership fees, flows of illicit cash across borders and last year’s evaluation of Rwanda’s defenses against money laundering all listed as up for discussion.

But one item stands out. On Wednesday delegates will “consider” a request by Russia, which FATF banned from participation in 2022 and suspended last year for invading Ukraine and cultivating ties with blacklisted nations, to be given “observer status” in the regional affiliate alongside Britain, the International Monetary Fund and 21 other countries and organizations.

“The Russians have identified the FATF system as something they can still influence,” a European source familiar with FATF’s inner workings told ACAMS moneylaundering.com on condition of anonymity. “Getting observer status … allows them to set the agenda, make their case and basically be in the room.”

Russia’s unprecedented suspension from FATF has undoubtedly damaged the nation’s global prestige and influence on world affairs, preventing it from, for example, securing favors from other countries by helping them obtain higher ratings after their own evaluations.

Granting Russia observer status in the ESAAMLG could weaken those outcomes by allowing the nation’s delegation to attend the group’s meetings, steer internal discussions towards their priorities and return to striking deals behind the scenes.

On first glance, circumstances appear ideal for horse-trading.

Five of the ESAAMLG’s 20 nations are on FATF’s gray list of countries “under increased monitoring,” and five of its 15 remaining members—Botswana, Lesotho, Madagascar, Mozambique and Tanzania—currently rate “non-compliant” or only “partially compliant” in at least half of the group’s 40 technical standards against financial crime.

Regional affiliates gauge the extent to which their members comply with FATF’s standards and use the group’s metrics to measure the real-world efficacy of their laws and regulations against illicit finance, but otherwise operate independently and autonomously.

Under that organizational structure, Russia can still draw a direct line to FATF through its leadership of a second regional affiliate, the Eurasian Group on Combating Money Laundering, or EAG, and observer status in a third, the Middle East and North Africa FATF.

Not welcome

The European source told moneylaundering.com that Russian authorities blocked him and three other European speakers from delivering remarks at the MENA FATF summit in Mauritania in December.

Russia’s “last minute” decision to exclude the four European speakers from the two-day summit suggests the Kremlin still wields considerable influence within the regional affiliate despite FATF’s restrictions, the source said.

Russia’s latest grab for soft power in Africa coincides with a debate within FATF on whether to place the country on its gray list or possibly even on its blacklist of “high-risk” jurisdictions alongside Iran, Myanmar and North Korea.

Regional affiliates and delegates of other nations can nominate countries for inclusion on the lists by supplying evidence showing that they pose a “substantial” threat to the global financial system. Pakistan became the first and only country to have landed on FATF’s gray list in such a way in June 2018, following a U.S. nomination.

Battling and blacklisting

Ukraine, Russia’s adversary on the battlefield, nominated Russia for FATF’s blacklist through Moneyval, the group’s European affiliate, not long after the Kremlin-ordered, full-scale invasion began in February 2022.

Since the nomination, Ukraine has submitted hundreds of pages of records purportedly showing that its adversary continuously, deliberately disregards FATF’s standards and violates global counterproliferation sanctions, including by buying military drones from Iran and ballistic missiles and other weapons from North Korea.

Russia has separately admitted to financing Wagner, a private military contractor blacklisted by Australia, Canada, Japan, Britain and the EU, and allegedly sought closer ties with Hezbollah, the Lebanese Islamist militia that the U.N. considers a terrorist organization.

The records Ukraine supplied laid the groundwork for Russia’s suspension from FATF on Feb. 24, 2023, the first anniversary of the full-scale invasion, two sources familiar with the nomination told moneylaundering.com on condition of anonymity.

Adding Russia to FATF’s blacklist would require financial institutions around the world to conduct enhanced due diligence on the originator and beneficiary of any payment involving the nation, which is already the target of a western commercial and banking embargo.

One of the two sources familiar with the nomination said the International Co-operation Review Group, a panel within FATF that reviews such cases and recommends additions and removals from the gray list and blacklist, has yet to come to a decision on Russia.

The ICRG “came very close” to recommending that FATF gray-list Russia during the group’s latest summit in Paris in February, the source said. “Nobody [in FATF] is raising any questions on technicalities [Russia’s violations of FATF’s standards] anymore. It’s political.”

FATF warned members on the last day of the summit to “remain vigilant” to the financial crime-related risks Russia poses but stopped short of imposing further restrictive measures.

In an email to moneylaundering.com, a spokesperson for the intergovernmental group described the suspension of Russia as an “unprecedented action taken against a member.”

The spokesperson declined to comment on the ESAAMLG’s scheduled consideration of Moscow’s request for observer status.

Among friends

Russia also retains power inside FATF through the EAG, a regional affiliate that also includes China, India, Kazakhstan, Kyrgyzstan, Tajikistan, Turkmenistan and Uzbekistan.

Yury Chikhanchin, a 72-year-old veteran of Russia’s security services and current director of Rosfinmonitoring, the country’s financial intelligence unit, chairs the EAG, which operates from offices near the Kremlin. Sergey Teterukov, a former employee of both the FIU and FATF, serves as executive secretary.

In an article published by the Russian Embassy in France in June, Chikhanchin described Russia’s possible addition to FATF’s blacklist as an “unjustified” step that would exceed the group’s mandate, violate international law and “destroy the global security architecture.”

Chikhanchin, now five years into his third term as the EAG’S chairman, incurred sanctions from Britain and the EU last year for his role in the invasion and occupation of Ukraine.

In blacklisting Chikhanchin in December, the EU accused his agency Rosfinmonitoring of working closely with Russia’s Defense Ministry on a “project for banking and treasury support” for regearing the nation’s economy for war.

Rosfinmonitoring has also “consistently” placed journalists, western-owned social media platforms, and other parties deemed critical of the Kremlin on a “terrorism and extremism” database.

In a move that further raised eyebrows following Russia’s suspension, FATF handed the task of assessing the nation’s progress in eliminating the few technical flaws that appeared among the otherwise overwhelmingly positive results from an onsite evaluation in March 2019 to the Russian-led EAG, which published a “follow-up report” in February.

The follow-up report, which was compiled by officials from India, Uzbekistan, Kazakhstan and China, upgrades Russia’s “partially compliant” scores in the areas of counterterrorism sanctions, counterproliferation sanctions and corporate transparency to “largely compliant.”

Russia’s grade for regulating cryptocurrency platforms for AML purposes meanwhile dropped from “compliant” to “partially compliant.”

FATF declined to adopt those findings in February, according to the second source, but the report, which carries only the logo of the EAG, can still be accessed from the intergovernmental group’s website.

By making the report available, FATF has conferred a degree of legitimacy that some claim Russia does not deserve.

Tristram Hicks, a former U.K. law enforcement official who advises countries on raising the effectiveness of their AML regimes, told moneylaundering.com that FATF’s regional affiliates “really control” the follow-up process, including by appointing the personnel who conduct the assessments.

“In this case, it’s not quite marking your own homework, but it’s certainly appointing the person who does the marking,” Hicks said. “The weakness of the follow-up process is also that it only looks at technical compliance and not operational effectiveness, which is relevant to claims that Russia is buying weapons from North Korea.”

Contact Koos Couvée at kcouvee@acams.org