It is time to cut Russia out of the global financial system

The writer is Ukraine’s minister of finance

In the aftermath of the cold war, world powers put in place systems of global governance. The goal was to protect liberal values, human rights and the world economy, and to extinguish the threat of nuclear annihilation.

The unquestionable success of this new rules-based international order was its reach, bringing in Russia and post-Soviet Union states as well as other burgeoning economies such as China and India.

But such a system only works when its members follow the rules. With its violent and unprovoked invasion of Ukraine, poisonous support of corruption and documented financing of terrorism, Vladimir Putin’s Russia makes a total mockery of the rules-based international order that gave us a unique period of peace and economic development.

Yet, despite everything, Russia maintains a foothold in the global system it is doing everything it can to undermine. Russia sits on the UN Security Council and other UN bodies. The Security Council was created with the specific objective of preventing wars. How, then, can Russia remain a member after embarking on its war of aggression against Ukraine?

We also have an international body to ensure global financial security — the Financial Action Task Force. Created by the G7, the FATF sets standards and promotes effective implementation of legal, regulatory and operational measures to limit three main risks: money laundering, financing of terrorism and of the proliferation of weapons of mass destruction.

Today, FATF has 37 member states. These include Russia, despite evidence of the country failing to meet FATF standards on all three fronts.

This month, FATF members will gather in Paris to consider further measures against Russia on a symbolic date — exactly one year since the invasion of Ukraine.

Countless investigations have uncovered Russia’s complicity in money laundering, which has only increased following the introduction of wide-ranging sanctions since the full-scale invasion. Russia has also been found to have enabled or otherwise co-operated with various terrorist groups and blacklisted states, including the Wagner Group, the Taliban, Hizbollah, the Assad regime in Syria, North Korea and Iran.

Iranian kamikaze drones were found to have been used to attack Ukrainian civilian targets, leading to further US sanctions in November 2022. Moreover, Russian individuals and entities were also placed under sanctions by the US in March 2022 for actions supporting the weapons of mass destruction and ballistic programmes of North Korea.

These examples barely scratch the surface, however. Russia is also responsible for state-sponsored and criminal cyber threats to critical infrastructure. Its war against Ukraine is exacerbating the global energy crisis and drastically raising food costs, causing great harm across the world, especially in developing economies.

In short, Russia is not simply undermining the global economic system. It is holding us all to ransom. More must be done, therefore.

Ukraine calls on the FATF to expel Russia and blacklist it. This would arguably be the most effective tool for restricting terrorists’ access to the global economy, as it would force all states to apply enhanced due diligence to any transactions involving the financial system of a blacklisted jurisdiction.

Sanctions are introduced by specific jurisdictions and are followed by their subjects. This leaves a big part of the global economy that has not introduced sanctions open to Russia.

Blacklisting by the FATF would create universal controls and require enhanced due diligence. Any transaction with the Russian financial system would be reviewed and scrutinised.

This would significantly increase the cost of doing business with Russia and effectively choke Putin’s ability to finance his illegal war of aggression. Just as important, it would help us to create a stronger, more resilient global financial system in the long term.

The EU, G7 and all other nations committed to a rules-based international order should urgently recognise the risks Russia poses to the integrity of the global financial system. They must also act to put Russia on their own “high-risk jurisdiction” lists and issue relevant market guidance.

Russia has been allowed to undermine the system from the inside for too long. The international order can only survive if the rules are followed. We have powerful mechanisms available to enforce these rules. The time has come to use them.