By Marla Dukharan

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Russia’s invasion of Ukraine has affected the City of London quite uniquely, suddenly catapulting it to much-deserved infamy as the world’s prime (Russian oligarch) ‘dark money’1 laundering location – finally!

Yet all this time, the European Union’s (EU) blacklist-makers were conveniently blind to London’s – and Russia’s – culpability, no doubt based on their umbilical relationship – the UK is the EU’s third biggest trading partner2 and Russia its fifth.3 In 2019, the EU was the largest investor in Russia, and EU-UK mutual investments rank among the world’s highest.

Juxtaposing the above with EU sanctions4 on Russia, the precise timing of the EU’s first-ever blacklisting of a white country on 14 February 2023 makes perfect sense, as only then did the EU’s ban on Russian oil take effect. Britain continues to escape EU blacklisting, notwithstanding the ‘discovery’ of £27 billion held by Russians5 in London and the city’s longstanding reputation as the world’s money laundering capital.6 This ‘oversight’ and the timing of Russia’s EU blacklisting confirms flawlessly again7 that EU blacklisting is nothing but politics and power cosplaying as compliance. But let me not repeat myself again.8

Come By Me. I Have Oil.

Google ‘oligarch’ and the results reflect the prevailing narrative that they are largely Russian/Soviet. But oily-garchies are everywhere, because the Paradox of Plenty9 predisposes resource-rich countries to subpar socio-economic outcomes, mainly because their extractive institutions10 promote corruption and kleptocracy (oligarchy’s jealous lover). The resource curse’s poster child has to be Venezuela11 – likely the world’s most resource-rich country (with the world’s largest proven reserves of oil, and vast deposits of gold, bauxite, iron ore and coal), and possibly the world’s most decayed12, into a narco-terrorist oligarchy.

The Global Organized Crime Index13 reports, “The Venezuelan state is accused of involvement in contraband, cocaine smuggling, money laundering, patronage, the illegal exploitation of natural resources, exchange-rate manipulation, and corruption schemes related to the distribution of food and medicine.” Hezbollah14 allegedly “helped to turn Venezuela into a hub for the convergence of transnational organized crime and international terrorism…has facilitated Iran’s cooperation with the Maduro regime.”

Venezuela has been mortgaging its oil to China and Russia15 and maintains significant ties including weapons manufacturing deals16 with the latter. Venezuela’s (oil-for-diplomacy) Petrocaribe17 deal effects China’s (indirect) political influence across the Caribbean. But while tiny Caribbean countries are indefensibly blacklisted by the EU et al, and pressured constantly by the OECD and FATF, Venezuela’s feet have somehow never been held to that fire, despite evidence of widespread state-sanctioned criminal activity. 

Indeed, several individuals and entities18 in Venezuela have been sanctioned/banned by the US, UK, EU19, Canada, Mexico, Panama, Switzerland, and Colombia, for terrorism, human rights abuses, corruption, drugs, weapons and human trafficking20, etc. In 2009 the FATF reported,21 “Venezuela has been classified as a transit country for illicit drugs…which account for the largest proportion of money laundering activities…corruption, which accounts for the largest number of cases analysed by the FIU, after…drug trafficking.” Yet, there is no evidence of FATF mutual evaluations post-201422 and Venezuela23 mysteriously does not appear on either of the FATF’s lists of Jurisdictions under increased monitoring24 nor High Risk Jurisdictions.25 In 2021 the OECD published “Gold Flows From Venezuela”26 highlighting significant illicit financial flows and “actual or potential risks of severe human rights abuses, conflict financing and other financial crimes”. Otherwise, Venezuela27 appears to be invisible to the OECD, with no evidence of peer reviews28 or presence on OECD lists.29 And despite EU sanctions30, Venezuela has never been EU-blacklisted.

Venezuela’s enormous natural resource endowment has made it invisible to the FATF, OECD and EU, and this invisibility cloak is likely to remain intact. Like Britain, Russia’s invasion of Ukraine has affected Venezuela quite uniquely – ”the United States approached the Maduro regime for direct talks centered on the liberation of US citizens held as political hostages in Caracas and easing US sanctions to enable Chevron to reactivate its oil operations in Venezuela.”31 Nothing like a crisis to create excuses for the unthinkable.

Forgive Me. I Have God.

To state the obvious, apart from Russia recently, no EU-blacklisted country is predominantly white. And with the exception of Russia, North Korea, and a few US colonies, all EU-blacklisted countries have been colonised by Europeans. Finally, the vast majority of EU-blacklisted countries are small states – but they somehow always forget to include the smallest state on Earth.

The Vatican City State (VCS) is the tiniest nation on Earth by population (<1,000 persons) and size (121 acres), but at its centre sits the largest religious structure on Earth – St. Peter’s Basilica. The Vatican is situated within the city of Rome in Italy, and is the only country to be declared a UNESCO World Heritage site.32 ‘The Vatican’ is metonymous with the ‘Holy See’ (HS)33, which is the sovereign governing institution of the Catholic Church, headquartered in the Vatican. The Pope is the Head of the VCS and the head of the Catholic Church, of 1.3 billion Catholics worldwide.

Mysteriously, the OECD’s home page34 lists 222 jurisdictions but the VCS/HS is absent, and is also excluded from the 165 countries subject to OECD compliance assessments.35 Similarly, EU-blacklisters are also somehow blind to the VCS/HS.36

The FATF’s website lists two assessments37 of the Holy See38 by MONEYVAL39, while the Council of Europe lists five.40 Importantly, the latest 2021 MONEYVAL report41 “is not an investigation of past or present allegations of criminal activities linked to the HS/VCS” however. No wonder the report concludes “Overall, the HS/VCS faces medium-low money laundering (ML) risk and low terrorist financing risk” and as such, the FATF does not list the HS/VCS as a High Risk jurisdiction42, nor one under Increased Monitoring.43 However, despite reporting “(MONEYVAL) is not persuaded that full scope AML/CFT on-site inspections every five years, supplemented by targeted inspections between assessments, is enough” the report states “in line with MONEYVAL’s Rules of Procedure44monitoring was discontinued in 2019.

Discontinued – despite ongoing alleged corruption45, fraud46, embezzlement and financial scandals47 too numerous to cite here, most recently prompting the Pope to nationalise Vatican assets.48

Discontinued – even when MONEYVAL’s report cites as its first key finding, “the authorities… consider the risk of abuse of office for personal or other benefits presented by insiders and related ML to be low. However, the assessment team disagrees with this conclusion and is of the view that risks presented by insiders are important.” 

Discontinued – even in the face of several other AML compliance deficiencies; “ML investigations have been protracted…partly because of under- resourcing on both prosecutorial and law enforcement sides, and insufficient specialisation of financial investigators”; “Actual sanctions imposed…are below the statutory thresholds…appear rather minimal…not proportionate and dissuasive”; “there is a considerable gap between the amounts seized and those confiscated…”; “the (risk assessment) does not generally describe who is presenting a ML threat, where they are, or how they are doing it, and there has been some uncertainty as to the main ML risk”; “Cases which have received wide coverage in the media have raised a red flag for potential abuse of the HS/VCS system by mid-level and senior figures for fraud (insiders) for personal and other benefit. However, these domestic threats are not addressed within the (risk assessment)”; “It is not clear that all high-risk scenarios are subject to enhanced due diligence measures”; “AML/CFT policies set for competent authorities are not sufficiently comprehensive” etc. 

Curiously, the 2022 annual report of the Vatican Bank’s financial regulator concludes with “In 2021, the FIU carried out a structured strategic analysis on the financial flows between the HS/VCS and Venezuela…to send money to Venezuela, funds were being sent via wire transfer to accounts held in third countries before ultimately reaching their destination.”49 Why would the use of correspondent banks and wire transfers pose such irritation to the Vatican? In the Caribbean, this is our reality. This problem would arise with many countries, not just Venezuela, but especially with EU blacklisted countries. Finally, why would the Vatican need to send money and to whom in Venezuela?50

The Vatican’s rating of ‘non-compliant’ with Recommendation 13 of the FATF51 on Correspondent Banking and ‘partially compliant’ with Recommendation 16 on Wire Transfers, perhaps explains. But beyond the obvious risks in transacting with Venezuela, non-compliance of this nature is especially alarming for the Vatican in particular. Since the Vatican is a micro-state within another state, almost all transactions originating from the Vatican must be cross-border in nature, and therefore must involve at some point, the use of correspondent banking and wire transfers.

The reason for the EU and OECD’s blindness and the FATF/MONEYVAL’s leniency towards the Vatican is obvious, but such treatment is utterly unfair and unjustified, especially with ever-emerging evidence of wrongdoing.52 Not that just cause is ever a material factor for blacklisting.

Vanuatu Has No Oil Or God, So It Remains Blacklisted With No Justification

Vanuatu is the world’s single most vulnerable country to natural disasters and is also one of the poorest. Having gained independence as recently as 1980, Vanuatu has struggled to achieve sustained socio-economic progress largely because of the typical extractive-colony institutional weaknesses that persist for generations post-independence, but also due to the frequent assault of volcanic eruptions and cyclones which heap damage upon Vanuatu’s weak economic, social, and physical infrastructure. 

Notwithstanding all this vulnerability, the OECD53 and FATF54 have given their blessing to Vanuatu for its much-improved compliance frameworks. In March 2021 the UK published its blacklist and did not include Vanuatu. And despite its zero corporate tax status, Vanuatu does not appear on Tax Justice Network’s corporate tax haven index55 and ranks 112th on their 2022 financial secrecy index.56 Yet the EU – with its unilaterally imposed, disproportionately applied and politically motivated blacklists – has blacklisted Vanuatu TWICE.

As I have argued ad nauseam57, the global North58 and the EU more specifically, pursue their unambiguously political, competitive and racist agenda against blacklisted countries in the global South, with absolute impunity. But the UN’s recently passed resolution59 “that would give low-and middle-income countries decision-making power over global tax affairs,” and Vanuatu’s successful appeal to the ICJ60 on climate change, offers some hope of fairness and justice, and demonstrates the growing global acknowledgement that small states matter. All of us – not just the smallest one. 

Father, forgive them; for they know not what they do – Luke 23:34

Recognised as a top economist and advisor on the Caribbean, Marla has led discussions and published reports on the Caribbean implications of COVID-19, the EU Blacklists, BREXIT, and changing US and Chinese policies, among other geopolitical developments. Marla has become a highly sought-after keynote speaker internationally on Caribbean issues, and she regularly advises governments, private sector executives and multilaterals to support their strategic decisions in the region.