Argentina at risk of falling onto FATF money-laundering ‘grey list’

Over the next two months, Argentina’s government will make two key moves: first, it will attempt to persuade the new president of the Financial Action Task Force (FATF), Mexican lawyer Elisa Anda Madrazo, to make a political decision in support of President Javier Milei’s administration, rather than give a negative read of the nation’s anti-money-laundering fight; second, it will try to speed up investments and the entry of dollars via a ‘blanqueo de capitales’ (assets amnesty for capital repatriation) in order to beat a possible sanction to the punch that could jeopardise bets it has made to increase Central Bank reserves.

Because of this, the government will try to squeeze every available minute, in a race against the clock. Negotiations are already underway in Paris, where Argentina’s inclusion on the dreaded ‘grey list’ – noting jurisdictions under increased monitoring – drawn up by the FATF is being assessed.

If Argentina receives a setback, the decision will dampen the positive expectations built up  by the passing of its RIGI (Régimen de Incentivo a las Grandes Inversiones)major investment incentive scheme and place at risk the moratorium that the Milei administration has pushed for in order to attract both domestic and foreign dollars to sustain its model of currency competition, prior to embarking on dollarisation.

According to a senior top-level official consulted by Perfil, Argentina’s representatives involved in negotiations with FATF staff are working round the clock to reverse a possible sanction by the international body.

“It is a process. I understand that the meetings in Paris about the draft they had prepared were positive. And they will continue to work until the formal evaluation date,” the libertarian official confided

Today Argentina has one foot in the intergovernmental organisation’s grey list, which measures deficiencies in the fight against the financing of terrorism and money-
laundering.

According to other sources consulted by Perfil, at the upcoming FATF plenary session in Paris in late October, the news “‘will not be beneficial for the country.”

Any downgrading of the nation’s anti-money-laundering qualification will be “due to the lack of resolution of reported cases,” said the sources.

It would also block Milei’s proposed assets amnesty because the legislation prohibits the externalisation of undeclared assets from FATF ‘grey list’ countries. The country where it applies would be excluded.

In addition, the legal stability behind the multi-million dollar investments lining up to enter the country thanks to the benefits of the RIGI scheme would be placed in doubt. Earlier this month, for example, representatives of more than 200 multinational companies, aligned with the United States, met with five mining provinces to explore projects in this sector.

The FATF, which was created in 1989 by the Group of Seven nations, is preparing to put Argentina on its grey list, Perfil understands. The country would join 20 others, including the likes of Burkina Faso, Cameroon, Haiti, Kenya, Syria, Monaco, Croatia and Venezuela. Only Iran, Burma and North Korea are on the blacklist, which is the next step down.

“Inclusion on the grey list is almost a foregone conclusion. In the best-case scenario, the country can hope that the FATF will give it a period of approximately one year to regularise the points in question,” said another source, who advised the Unidad de Información Financiera (UIF) money-laundering watchdog during the Kirchner administrations.

If the sanction is confirmed, it will impact the flow of money into the country that the Milei administration is banking on, in turn affecting the circulation of dollars in the domestic economy.

Unfinished judicial processes, where corruption and possible money-laundering schemes intersect, are the problem facing the government and the FATF’s main objection. 

In Paris, the body’s staff want Argentina to dedicate greater resources to the investigation of suspicious behaviour, which would allow for results when irregularities are detected.

More than anything, it seeks “more effective judicial action, with more magistrates and dissuasive and proportionate sanctions.” This is a standard requirement for grey-listed countries.

The frustrated intervention of the K2 Integrity consultancy firm, represented in the country by Mariano Federici, the former head of the UIF during Mauricio Macri’s 2015-2019 administration, also raised eyebrows at the FATF. 

The international firm, which specialises in anti-money-laundering issues, participated in analysis meetings with the government but was later sidelined following a lack of agreement. It did, however, access privileged information

“Sloppiness left a bad precedent,” said one expert from the field. Federici was critical of Federal Judge Ariel Lijo, the Milei administration’s candidate for a bench on the Supreme Court, noting that the magistrate had left part of a financial investigation “unfinished in order to guarantee impunity for [ex-vice-president Amado]) Boudou and some powerful businessmen linked to the political financing of [former lower house Speaker] Sergio Massa.”

The likely review of Argentina’s status is part of the extended inheritance that Milei received upon taking office. The arrival of the Covid-19 pandemic overtook the qualification assessment that the country had to face in 2020, when judicial action was questioned by the UIF itself, which had been commanded until December 2019 by
Federici. 

In the intervening period, under the 2019-2023 administration of former president Alberto Fernández, Carlos Cruz and Juan Carlos Otero were appointed auditors of the anti-money laundering agency.

According to sources, the FATF’s upcoming criticism of Argentina’s anti-money-laundering efforts are out of the government’s hands. This is what worries intermediaries. 

“It is a political resolution and is linked to the ability they will give Milei to increase the flow of dollars into the country, much of which will leave the so-called ‘tax havens’ to settle in Argentina, under the extraordinary conditions of a moratorium and the development of high-yield activities, such as energy and mining,” summarised another source familiar with the matter.