The Financial Crimes Enforcement Network (“FinCEN”) of the U.S. Department of the Treasury on February 25, 2014 warned all financial institutions “to take reasonable, risk-based steps regarding the potential suspicious movement of assets related to Viktor Yanukovych departing Kyiv and abdicating his responsibilities and other senior officials resigning from their positions or departing Kyiv.” This action comes amidst widely published allegations that Ukrainian officials, and especially President Yanukovych, used their offices to enrich themselves. Photographs of the former President’s heretofore secret mansion with its own zoo have fueled these concerns. Accordingly, “FinCEN is reminding U.S. financial institutions that they are required to apply enhanced scrutiny to private banking accounts held by or on behalf of senior foreign political figures and to monitor transactions that could potentially represent misappropriated or diverted state assets, the proceeds of bribery or other illegal payments, or other public corruption proceeds.”
This action comes on the heels of warnings from groups such as Transparency International that countries such as the US and the UK must be vigilant to protect themselves from being used as laundries for ill-gotten Ukrainian gains. Robert Barrington, the Executive Director of Transparency International UK has stated that “It is important to act quickly and before it is too late. Right now, it is likely that corrupt assets of Ukrainian origin are flowing through the UK’s financial system. The experience of the Arab Spring taught us that swift action is necessary to freeze and recover stolen assets.” The UK government has not yet spoken on the issue, but no doubt the pressure is mounting for UK Treasury, the National Crime Agency or the Financial Conduct Authority to issue their own money laundering alert with respect to Ukraine especially as there have been allegations published by NGOs linking suspicious activity to the UK.
FinCEN’s warning is likely to presage enforcement action in both the US and the UK. Financial institutions in the US that believe they might be encountering ill-gotten Ukrainian gains should file Suspicious Activity Reports and follow their AML policies to be sure that they are not unwitting accomplices to a global money laundering exercise. Those with questions should consult counsel.