EU-UN study suggests sanctions for Eastern European banks for SARs and customer identification failures

Illicit financial flows (IFFs) in the EU’s Eastern Partnership (EaP) region, can be estimated at around €29 billion (US$31 billion) every year according to a new study released by the EU and the UN Interregional Crime and Justice Research Institute.

One of its recommendations to counter IFFs is that consideration should be given to tightening controls on financial institutions in the EaP region – Armenia, Azerbaijan, Belarus, Georgia, Moldova and Ukraine – to file suspicious transaction reports (SARs) and successfully identify beneficial owners of bank accounts, companies, and trusts.

Suspicious transactions and accounts

The financial sector may often be lax in reporting of suspicious transactions and identifying beneficial owners unless meaningful sanctions are imposed, according to the study, Illicit Financial Flows and Asset Recovery in the Eastern Partnership Region: A Mapping of Needs and Recommendations.

It says sanctions could include orders for suspension of banking activities or the permanent closure of particular entities that fail to adequately report suspicious activity.

Good practices in other regions have shown that reporting entities – including banks – quickly improve the quality and timeliness of their reporting when faced with the real threat of suspension or closure the authors say.

Scope of study

The study sheds light on the damage being caused to the EaP region as a result of unchecked IFFs and highlights the importance of strengthening cross-border relationships within the region to maximise the capture of illicitly-obtained assets.

While the study was prepared based upon data and information collected in 2021 and Russia’s invasion of Ukraine in particular has affected the region’s politics and security since then, the authors say the recommendations presented remain relevant for policymakers and practitioners in the EaP countries as well as international stakeholders.

Illicit Financial Flows and Asset Recovery in the Eastern Partnership Region: A Mapping of Needs and Recommendations, can be found here.


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