The U.S. Treasury Department have designated the Ukraine and Nauru as “primary money laundering concerns”, under Section 311 of the *USA Patriot Act*. The jurisdictions were described as not taking the fight against money laundering and financial crime seriously.
Section 311 (31 U.S.C. 5318A) authorises Treasury to designate a foreign jurisdiction, financial institution, class of transactions, or type of account as such and to impose one or more of five “special measures.” Four of these impose information-gathering and record-keeping requirements upon those U.S. financial institutions dealing either directly with the jurisdiction designated as one of primary money laundering concern, or dealing with those having direct dealings with the designated jurisdiction. Under the fifth special measure, a U.S. financial institution may be prohibited from opening or maintaining in the U.S. a correspondent account or a payable-through account for a foreign financial institution if the account involves the designee.
On Friday, Deputy Secretary Ken Dam said, *”With our designations today under Section 311, we are signaling to the world that we are serious about ensuring that the international financial system is safeguarded against the threat of money laundering. Our words have meaning and our actions have real teeth: these jurisdictions are bad for business, and U.S. institutions now must recognise this fact.”*
He said the use of Section 311 is yet another tool that the United States is using to ensure the international financial system is not abused by criminals.
In the case of Ukraine, Treasury intends to impose requirements on U.S. financial institutions based on Special Measures 1 – 4. On Nauru, Treasury intends to impose Special Measure 5, which will prohibit U.S. financial institutions from opening or maintaining correspondent accounts with Nauru-licensed financial institutions.
The Financial Action Task Force (FATF) – through its Non-Cooperative Countries and Territories (NCCT) process – has called upon its members to impose countermeasures with respect to Ukraine and Nauru; this, it has said, was a result of their failure to put into place sufficient anti-money laundering frameworks. FATF is the premier multilateral body in the international fight against money laundering and terrorist financing. With the NCCT process, FATF seeks to identify and take action with respect to jurisdictions that fail to meet international anti-money laundering standards.