Ukraine Money Laundering

Tell me you don't know money laundering without telling me...

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The old disinformation has reared its ugly head again. Tell me if you’ve heard this one before:

"I see that some are worried about the foreign aid to Ukraine. Do not worry! This is a working money laundering scheme. Western and Ukrainian officials will embezzle these funds, and no more than 15% of the entire aid will reach the trenches." — Ramzan Kadyrov (link is a Russian-controlled media outlet)

A Chinese think tank in early 2023 published, claiming that US aid to Ukraine is seriously "watered-down" as Kiev and Ukrainian people only received very little from the huge amount of the US has promised, while the most of the assistance are actually serving the "money laundering plan" for the US military industrial complex. (Link is a Chinese state-controlled media outlet).

“Think of all the money laundering that the radical Marxist Democrats and the feckless, spineless Republicans have been doing! All the billions of dollars to Ukraine, the ridiculous ‘pier’ for aid to Palestine, the untolled millions of dollars for illegals, the millions of dollars to ‘end homelessness’. The American citizen is being robbed by its own government at every level.” — random (probably troll) account on FaceBook.

Most people repeating these ridiculous assertions got them either from (badly spelled and written) memes or from state-controlled press in countries such as China and Russia. Most of them don’t even understand money laundering, so let’s get into it.

First, Preston Stewart explains that there’s no evidence that Ukraine aid is any kind of money laundering scam. None. Zero. Zilch. Nada.

What is money laundering? For the most concise definition, I’ll quote the Institute for Financial Integrity’s proprietary platform, although Stewart references the Treasury definition, which is also good:

Money laundering is the criminal practices of processing ill-gotten funds, or “dirty” money through a series of transactions designed to “clean” the funds so they appear to be the proceeds of legal activities. To achieve this goal, money launderers often attempt to conceal the identity of the parties involved in a transaction, as well as the source and ultimate destination of the funds.

As we can see—both from Stewart’s video and from the source I quoted—the definition does not fit when it comes to Ukraine aid. For one, the counterparties to these transactions are well known. The money is not criminal proceeds - it’s already “clean” (although there are those of the “taxation is theft” faction who will argue that taxes are criminal proceeds). Also, most of the aid Ukraine receives from the West is in the form of military aid - equipment, military materiel, and the like. This helps America’s defense sector, which manufactures ammunition, weapons, and other materiel, keeps Americans employed, and keeps profits in the US economy.

Of course, there are those who claim this is also money laundering. Yes, I’m looking at you, RFK Jr!

Money laundering generally follows three stages:

1. Placement

2. Layering

3. Integration

Placement introduces illicit funds into the financial system - usually through financial institution - without attracting the attention of the bank or law enforcement. Some commonly used techniques are structuring currency deposits in smaller amounts to evade reporting requirements, or commingling licit and illicit funds.

Layering involves distancing the proceeds of crime through a series of transactions designed to obscure the origins of the money, complicate the paper trail, and mail the funds appear legitimate. This second phase is meant to distance illegal proceeds from their source (often a criminal or someone looking to evade sanctions) by creating complex layers of financial transactions.

And finally, integration allows these dirty funds to enter the economy disguised as legitimate funds.

How is the aid sent to Ukraine—much of it in military equipment and loans—of illegitimate origin?

How is it being structured to obscure its origins?

How are these weapons, munitions, military vehicles, etc. being integrated into the financial system?

Hint: it’s not.

None of these stages apply to the aid we’ve sent to Ukraine. As previously mentioned, the cash Ukraine has received is “clean.” It’s not the proceeds of crime. Congress has authorized the funding, and most of the aid comes via military equipment.

PBS late last year broke down the US security assistance to Ukraine, which included infantry equipment, air defense, air-to-ground missiles, military aircraft, artillery, armored vehicles, drones, ground support vehicles, and other aid. Nowhere in this list is a means to launder money. No one has tried to shepherd funds into the financial system while minimizing the possibility of detection to its ultimate beneficial owner (which these people claim is Ukraine).

The funds are tracked and accounted for. Publicly.

If you don’t trust government numbers, that’s certainly a valid point of discussion. But if you want to have a substantive discussion about these numbers, provide sources that aren’t part of Russia’s disinformation campaigns, absurdly claiming that Ukrainian President Zelensky bought a palace in the UK, or that his wife bought a million dollars’ worth of Cartier jewelry.

As I’ve mentioned before, Ukraine is not clean from corruption. But the country’s improvements in that sphere are notable, especially under daily fire from Russian missiles.

Certain defense articles are being tracked to ensure accountability.

The US Senate in mid-December passed an initiative to establish a Special Inspector General (IG) for Ukraine as part of the annual National Defense Authorization Act that would oversee the humanitarian, economic and security assistance funding to the country and ensure that the funds are appropriately spent.

The Institute for the Study of War in January noted that accountability efforts in the United States over the funds sent to Ukraine are significant and continue to grow.

• Yes, a small Ukrainian defense enterprise embezzled $40 million from public ammunition procurement funds. But Ukraine detected the theft and stopped it.

• Zelensky also fired the previous defense minister after domestic corruption scandals unrelated to Western assistance emerged. Kyiv is also engaging the Ukrainian NGO community to detect and deter corruption.

• Ukrainian and US defense personnel have been working to continue to improve monitoring and tracking of US aid, and US DoD officials assert that there is no evidence that US-provided military assistance to Ukraine has been misappropriated.

• Weapons provided by the West are being used as intended. “We have seen no credible evidence of the misuse or illicit diversion of American equipment provided to Ukraine,” Defense Secretary Lloyd Austin said in January at the 18th Ukraine Defense Contact Group meeting.

If weapons were being diverted or misused, I would submit there’s no way Ukraine would have lasted two and a half years against Russia.

The discussion about government corruption is valid and speaks to likely bureaucratic incompetence, but again - it has zero to do with these spurious allegations of money laundering.

Global anti-money laundering watchdog, the Financial Action Task Force (FATF) in 2022 lauded Ukraine for the progress Kyiv made to combat the country’s money laundering risks, highlighted in its mutual evaluation report.

Here’s the thing, however. FATF is rightly concerned that Russia’s invasion and destruction of Ukrainian infrastructure will inhibit the progress Ukraine has made in the AML sphere. Fighting money laundering and terrorist financing from a bunker while sirens blast through the air is not exactly optimal.

So if you’re concerned about money laundering in Ukraine, you might want to throw your vocal support to stopping Russia’s attacks.

And if you don’t like how your tax dollars are spent, go out and vote!

But stop spreading money-laundering disinformation without understanding what money laundering is.