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. Last Updated: 07/27/2016

Russia Taken Off Financial Blacklist

After more than two years of legal scrambling, Russia on Friday was erased from the Financial Action Task Force's international blacklist of non-cooperative countries in the global fighting against terrorism and money laundering.

"This is a great success for Russia," FATF president Jochen Sanio said in a statement announcing the decision, which was made after three days of talks in Paris. "The FATF looks forward to close collaboration with Russia in the ongoing fight against money laundering and terrorist financing."

Sanio also invited Russia to become an observer of the global body, comprised of 31 wealthy nations, as a prelude to full membership, which he said could come as early as next year. Current observers include more than 20 international associations and organizations, such as the European Central Bank, the World Bank, the European Bank for Reconstruction and Development and the Egmont Group, a group of 69 countries with financial intelligence units that Russia joined in early June.

"We will continue to cooperate with this organization and, I hope, in the foreseeable future we will become members," Prime Minister Mikhail Kasyanov was quoted by Interfax as saying.

Analysts called the decision by the FATF more of a political victory than an economic one, although the embarrassment of being considered a facilitator of tax cheats and terrorists did spur the government to push through tough new legislation and to empower a new financial monitoring body that has made the country more attractive to investors.

Some analysts suggested the decision was tied to Russia's growing importance as an energy supplier to the West and as an incentive to back the United States in its war on terror. The decision came on the same day British Prime Minister Tony Blair was in Moscow to discuss possible military strikes against Iraq with President Vladimir Putin. Both Britain and America are FATF members.

The FATF said that it decided to delist Russia after being assured by Finance Minister Alexei Kudrin and other officials actively involved in negotiating with the global body that the government will complete the reform process that kicked into high gear after Russia was blacklisted in June 2000.

As late as last week, it was widely thought that Russia would remain on the blacklist until at least next year. At its last plenary session in June, the FATF praised Russia's progress, but did not change its status.

"This is a good present for my birthday," an obviously elated Kudrin, who spearheaded the government's removal effort, told a meeting with the editors of leading Russian wire agencies and newspapers on Friday, a day before his birthday.

"As a result of titanic efforts made by the president, the government and the State Duma, a working mechanism has been established in Russia in the fight against money laundering," Interfax quoted Kudrin as saying later in the day at a meeting of the board of directors of ARKO, the agency for restructuring banks.

"This is an answer to the campaigns that are from time to time conducted [overseas] against our banks out of habit or inertia," he said.

State Duma Speaker Gennady Seleznyov said the decision should have come long ago. "It's about time," he told reporters Friday. "All the necessary laws have been adopted and all the international conventions have been ratified."

Officials and experts said the decision should boost the country's image among its foreign partners and investors, possibly lifting credit ratings and lowering the cost of financing.

"We expect this decision to positively influence the general investment image of our country," said Cabinet spokesman Alexei Gorshkov.

"Clearly [the decision] underpins and supports the local investment climate," said Stephen O'Sullivan, head of research at United Financial Group.

Banking experts said the decision should also make business easier.

"It will make it easier for us to talk to our foreign partners, because they will no longer point at the fact that Russia is still on the blacklist," said Andrei Bugrov, deputy chairman with Interros holding and head of the board of directors of RosBank. "It all depends on the banks themselves, on whether they follow the well-known standard 'know your customer.'"

Mikhail Matovnikov, deputy chairman with Interfax Rating Agency, which monitors banks, said the financial boycott of Russian banks that began with the 1998 crisis ended two years ago, or about the same time that FATF included Russia on its list.

"I think that Russian banks really became more transparent during the last two years," Bugrov said.

Not all experts agreed, saying the banking sector remains opaque, with many transactions still being carried out offshore.

"The Central Bank is trying to change this by introducing international accounting standards and imposing additional capital controls," said Christof Ruhl, chief economist for the World Bank's Moscow office. "So far this has not happened, as such changes by nature need more time.

"The FATF decision has no immediate practical consequences for Russia, other than a better reputation, of course," Ruhl said.

Besides Russia, FATF also removed Dominica, the Polynesian island Niue and the Marshall Islands from the list.

FATF lists now include 11 non-cooperative countries or territories: the Cook Islands, Egypt, Grenada, Guatemala, Indonesia, Myanmar, Nauru, Nigeria, the Philippines, St. Vincent and the Grenadines, and Ukraine.

FATF threatened Nigeria and Ukraine with potential counter-measures, including virtual isolation from international financial institutions, unless they tighten controls by Dec. 15.

The next plenary session is scheduled for February.

Staff Writer Alex Nicholson contributed to this story.