After days of discussions, the world’s leading anti-money laundering watchdog, the Financial Action Task Force (FATF), opted last week not to blacklist Russia despite efforts from Kyiv to sway members to do so over the Kremlin’s increasingly closer ties with blacklisted North Korea and Iran.

The FATF, which monitors illicit financial activity like money laundering and terrorist financing, suspended Russia’s membership in February 2023 due to Moscow’s conduct with blacklisted states and cyber crimes.

The international organization met in Paris from Oct. 22 to 25 to discuss which countries should be moved from its gray and blacklists. But while the FATF upheld Moscow’s suspension, it failed to take the punishment a step forward by branding Russia a “high-risk country,” marking another victory for Russia against a Western-led sanctions regime that has looked to ostracize it in the world.

The FATF said it condemns Russia’s full-scale invasion of Ukraine, but the organization requires a full consensus from its 40 members to move Russia to its no-go list. Some countries, like South Africa and Brazil, have approached Russia more amicably than their Western counterparts.

Ukraine, which is not a member, has tried to encourage the FATF to brand Russia as a high-risk country, but to no avail. In the leadup to the Paris plenary, Kyiv presented a dossier to the FATF that evidenced Moscow’s increasingly close-knit relations with North Korea and Iran- both blacklisted states.

“Russia is threatening the security and integrity of the global economy by allowing sanctioned states like North Korea and Iran a back door to enter and destabilize the international financial system,” the Finance Ministry said in a press release before the meetings.

Ukraine’s dossier also mentioned Russia’s funding of the Kremlin-financed mercenary force the Wagner Group, the role of cryptocurrencies in financing Russian terrorism, and money laundering from stolen Ukrainian goods like grain and minerals, Politico reported.

Blacklisting Russia would have sent a strong symbolic message about the international community’s support for Ukraine, Tom Keatinge, director of the Center for Finance and Security at the Royal United Services Institute (RUSI), a London-based research group, told the Kyiv Independent.

“In practical terms, it would also force the financial system (both banks and their regulators) of countries that remain bafflingly indifferent to the Kremlin's murderous activity to pay attention to the transactions they are handling,” he added.

Russia is breaching the UN’s sanctions and FATF’s standards by blatantly working with North Korea, Keatinge said. Pyongyang has supplied Moscow with missiles and, more recently, troops to bolster its war on Ukraine in exchange for oil, the Finance Ministry said.

The Finance Ministry also highlighted Russia’s procurement of ballistic missiles from Iran and the two enemy nations’ close banking and financial cooperation. Days before the meeting, the ministry stressed the importance of acting decisively and looked to the FATF to lead the charge.

“Failing to challenge Russia’s defiance would weaken the foundations and future stability of the global financial system,” Ukraine’s Finance Minister Serhii Marchenko said on Oct. 17.

Keatinge said it is not clear why the FATF has not penalized Russia more harshly, but he noted that the multinational organization is “fractured” when it comes to geopolitics. He suggests that if the FATF is unwilling to take serious action, then it’s down to the U.S., EU, and Ukraine’s allies to press harder with sanctions.

“It’s time to take the gloves off,” he said.

As Russia gets more desperate in its war, with limited battlefield successes and an economic squeeze, the greater the threat Moscow poses to the global economy, the Finance Ministry warned.

The FATF told its members to stay vigilant about emerging risks and the Finance Ministry said it will work with individual governments to counter Russia’s financial crimes. Russia continues to work with cybercriminal gangs, like the Russia-based Evil Corp, to target global economies, including those of several FATF member states, the ministry claims.

The U.S. recently sanctioned members of Evil Corp, claiming that the group developed and distributed the Dridex malware. Over 40 countries and hundreds of banks were impacted by the malware, causing $100 million in theft losses and damage.

Timothy Ash, a senior emerging market (EM) sovereign strategist at BlueBay Asset Management, stressed that tightening sanctions would weaken Russia’s economy, restricting its ability to wage war on Ukraine and give Ukraine and the West leverage in future negotiations.

But the FATF’s decision to not blacklist Russia has instead again unearthed the lack of leadership among the West when it comes to curtailing Russia, he told the Kyiv Independent.

“This should have been a slam dunk,” he said.