EU Has Blacklisted Russia: What It Means in Practice

On January 29, the EU’s decision on adding Russia to the “black” list of countries with a high risk of money laundering and terrorist financing came into force. Managing Partner of K.A.C. Group Volodymyr Harkusha explains how this will affect Russian finances and what actions will be taken against them.

The decision was made back in December. Within a twenty-day period, no objections were received from the EU Council and the European Parliament, and, in accordance with the procedure, the Decision entered into force. The document No. 32026R0046 amended Delegated Regulation (EU) 2016/1675, which provides for enhanced control by all EU banks over any financial transactions related to Russia.

The fact that Russia is a terrorist state, which is also engaged in money laundering on a global scale, is beyond doubt. What will be the actual consequences?

Formally, this will lead to the application of enhanced verification measures for any transactions related to Russian individuals and legal entities. Financial transactions will slow down, and their costs will increase. The number of requirements for documentary confirmation of beneficiaries and the origin of funds will increase.

In practice, the vast majority of European sensible financial institutions will avoid any contact with Russian money in any form. No “gray” commissions received for their services are worth the reputational and, as a result, financial losses. A vivid example of this is Deutsche Bank, whose offices were searched again on January 28 in the money laundering case of the scandalous Russian oligarch Roman Abramovich.

Thus, the following key elements are excluded from European financial circulation in Russia: individuals and legal entities of Russian origin, foreign legal entities associated with a terrorist country, any transactions in euros and currencies of EU member states. These are also expected to include the British pound and the Swiss franc, although the UK and Switzerland are not members of the EU.

Similar international taboos on a global scale can be imposed by decision of the FATF (Financial Action Task Force) – an intergovernmental organization that sets global standards in the field of combating money laundering and terrorist financing. The Russian Federation’s membership in the FATF has been suspended indefinitely since February 2023 due to the invasion of Ukraine. However, the decision to recognize Russia as a country with a high risk of money laundering and terrorist financing has not been made by the FATF itself, although this issue has been raised several times.

The positions of China, India, Saudi Arabia, the UAE, Brazil and South Africa stood in the way. This is understandable: they really, really disapprove international terrorism, but business is business. And it does not only concern specific businesses between Russia and China, or Russia and India. Russian business uses the currencies of these countries, for example, the UAE dirham, in settlements with other countries, bypassing currency sanctions restrictions.

The next plenary meeting of the FATF is scheduled for February 2026 in Mexico City, and the issue of including Russia in the FATF “black” list will once again be raised there. This time, the abovementioned EU Decision will contribute to the adoption of a positive decision.

What are the possible reflections in Russia after the prospective adoption of the FATF decision? Iran has already been through this ordeal, that is, it already has possible template solutions. These include: involving cryptocurrency in financial transactions, export-import contracts through proxy persons from third countries, use of limited convertible currencies of third countries in settlements. Moreover, Iran invented its own life hack: international movement of foreign currency cash by large-tonnage transport.

Nevertheless, in the conditions of the modern technogenic and informational world, all these tricks can be quickly uncovered. What remains is to rely on the goodwill of those who are responsible for the control over them.

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