Ministry of Finance of Ukraine Calls for Recognition of Russia as High-Risk Jurisdiction for Admitted Financing of Wagner Group from state budget

The Ministry of Finance of Ukraine urges the international community to recognise russia as a high-risk jurisdiction and issue relevant market advisories to avoid contributing to terrorism and organised crime financing.

Yesterday, russian president Putin said in a speech that russia fully financed Wagner Group from the federal budget and paid Wagner companies “86,262,000,000 roubles [about 1 billion USD] of cash support and incentive payments <…> and 110,179,000,000 roubles [about 1.3 billion USD] of insurance payments" over the past year.

The Wagner Group is a paramilitary organisation founded in 2014 which employs terrorist tactics around the world. It has been designated as a terrorist organisation by Estonia, Lithuania, and the French parliament. The French parliament has called for the EU to formally label the Russian mercenary group Wagner as terrorists, and there are reports that the UK is also planning to label the group as terrorists.[1] The US has sanctioned Wagner Group as a Transnational Criminal Organization.[2]

The Wagner Group uses russian state funds to spread death and destruction across the world. It has committed numerous war crimes in Ukraine, supported the murderous regime of Bashar al-Assad in Syria and been accused of committing numerous atrocities and war crimes in Mali, the Central African Republic,[3] Sudan[4] and Libya.

Given that the Wagner Group is being funded directly from the russian state budget, any entity dealing within the russian jurisdiction is at risk of contributing to terrorism and organised crime financing. International businesses which continue doing business and paying taxes in russia are indirectly contributing to the Wagner financing. Financial institutions and other entities outside of russia dealing with russia-sourced money face a high risk of unknowingly participating in Wagner-related illicit activities such as laundering of illicit funds obtained by Wagner through their criminal activities in various countries, assistance with supply and financing of the criminal group, and participation in illicit trade supporting Wagner operations.

Sergii Marchenko, Finance Minister of Ukraine, called on the Financial Action Taskforce (FATF) and the global financial community to take a consolidated position to counter russia’s threat to the integrity of the global financial system and international businesses: “russia’s financing of the ultraviolent Wagner Group is no longer debatable. By financing Wagner Group russia is exporting torture, rape and mass murder across the world. This not only violates the FATF standards but represents a serious challenge to global peace and security. By failing to properly sanction russia and allowing them access to the global financial system, we invite further destruction and undermine the international order set in place to protect us all.”

Interestingly, mercenary groups are illegal in russia, according to the country’s Criminal Code[5]. “The fact that the Wagner mercenary group was funded from the state budget in violation of russian laws and norms once again demonstrates that the existing legislation is no more than a smokescreen covering up an ineffective system for prevention of terrorism and criminal organisations financing abused by the regime at will,” the Minister of Finance added.