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. Last Updated: 07/27/2016

FATF Slaps Sanctions on Kiev

KIEV -- Ukrainian officials and bankers scrambled Friday to deal with sanctions imposed by an international task force combating money laundering.

Ukrainian Prime Minister Viktor Yanukovich said his Cabinet would consult with the Paris-based Financial Action Task Force about what steps Ukraine must take for the sanctions to be lifted.

"We must create all the necessary conditions to help reduce the share of the shadow economy in Ukraine," he was quoted by Interfax as saying.

The FATF announced Friday that its 29 member nations would apply sanctions against Ukraine because of its "failure to enact anti-money-laundering legislation that meets international standards."

The sanctions involve stringent requirements for identifying clients and owners before any business is done with Ukrainian companies or individuals. Transactions with Ukrainian businessmen and bankers must be regularly reported, and greater study would be required prior to opening foreign branches of Ukrainian banks.

Ukraine, which has been on the FATF's blacklist of nations not cooperating with the fight against money laundering since September 2001, had tried to avoid the sanctions by passing a law against the illegal practice earlier this month.

But the FATF said that the new law was insufficient.

Yanukovich on Friday blamed Ukrainian lawmakers for failing to pass amendments that would have toughened the bill.

The FATF said it would review Ukraine's action at its next meeting in February. "The FATF hopes that, prior to that meeting, Ukraine will comprehensively address the deficiencies in its anti-money-laundering regime," it said.

Alexei Berezhnoi, the chief of the Ukrainian Finance Ministry's monitoring service, said some FATF states could act differently depending on their national legislation, with some possibly going as far as blocking all operations involving Ukrainian banks.

The U.S. government, for example, on Friday used for the first time the authority granted by last year's anti-terror Patriot Act, labeling Ukraine and the tiny Pacific island of Nauru as money laundering "concerns."

Washington will require U.S. banks to maintain more extensive records on account owners that do business with banks in Ukraine or with institutions that deal directly with banks in Ukraine.

Ukraine's banking sector would likely try to dodge the sanctions by moving their accounts away from the West to offshores, said Valery Magirovsky of the private Energia bank, Interfax reported.

(AP, Reuters)