In a significant escalation of financial oversight and regulatory action, the European Commission has officially designated the Russian Federation as a high-risk third country for money laundering and terrorist financing. This move, announced in early December 2025, places Russia on the European Union’s list of jurisdictions whose national anti-money laundering and counter-terrorist financing (AML/CFT) frameworks contain strategic deficiencies.
This designation marks a departure from the current global stance of the Financial Action Task Force (FATF). Although FATF suspended Russia’s membership in 2022 amid concerns over systemic risk and failure to meet international AML/CFT standards, it had not formally blacklisted the country as “high-risk.” The EU’s decision therefore represents a clear and unilateral step by the bloc to strengthen its own financial crime defences.
The Reason Behind This Step
The decision stems from a rigorous technical assessment conducted by the European Commission under the EU’s 4th Anti-Money Laundering Directive. The directive empowers the Commission to identify non-EU countries with strategic weaknesses in their AML/CFT systems that pose a significant risk to the EU’s financial system.
According to the Commission’s analysis, Russia failed to meet several critical standards necessary for stringent prevention of money laundering and the financing of terrorism. These strategic deficiencies included the absence of effective measures to detect, deter and disrupt illegal financial flows, and a lack of sufficient cooperation with EU authorities on information sharing and compliance. The assessment drew on inputs from EU member states, the European External Action Service (EEAS), open-source intelligence and public documentation.
EU officials have described the move as important to protecting the integrity of the Union’s financial system and mitigating the risks that could arise from continuing financial interactions with entities connected to Russia. Enhanced governance and oversight are deemed necessary given Russia’s financial networks and the potential for systemic vulnerabilities.
What “High-Risk Jurisdiction” Means
Under the EU’s AML framework, a “high-risk third country” is one whose financial crime prevention mechanisms are considered insufficient or inadequate compared with international norms. This designation triggers mandatory compliance measures for EU-regulated entities, including banks, insurers, investment firms, and a wide range of professional services such as lawyers, accountants, real-estate agents, and trust service providers.
Key practical implications for businesses and financial institutions include:
- Enhanced Due Diligence (EDD)
- Risk Reclassification
- Enhanced Monitoring and Reporting
These measures apply irrespective of whether the relevant entity’s activity is based inside or outside Russia, as long as there is a clear connection, for example, a beneficial owner residing in Russia or a business tied to a Russian company.
Legal and Regulatory Framework
The legal basis for this action lies in Directive (EU) 2018/843 (AMLD IV) and associated delegated regulations. Under this framework, the Commission is required to periodically review and update the list of high-risk jurisdictions to align EU law with evolving global threats and vulnerabilities in AML/CFT regimes worldwide.
The specific act that adds Russia to the list, a delegated regulation will only enter into force after a one-month review period during which both the European Parliament and the Council of the European Union can scrutinize or object to the measure. This review period can be extended by another month if necessary. If no objection is raised, the regulation becomes immediately binding across all EU member states.
Russia’s AML/CFT Standing and FATF Suspension
The FATF is the globally recognised standard-setting body for anti-money laundering and counter-terrorist financing. While Russia was previously a full member, it was suspended in 2022 due to substantial compliance concerns following its invasion of Ukraine. This suspension meant a weakening in institutional cooperation and transparency, intensifying scrutiny of Russia’s financial regulatory framework. However, FATF has not yet designated Russia as high-risk (“blacklisted”), leaving it off both the “black” and “grey” lists commonly used as benchmarks in global AML/CFT policy.
The EU’s step to unilaterally list Russia signifies a divergence between EU policy and FATF’s current classifications, illustrating a more affirmative stance by the EU on financial crime and geopolitical risk.
Reactions and Broader Significance
Senior EU officials have characterised the listing as an important reinforcement of the bloc’s financial crime defences. It is also viewed in political circles as part of the broader strategy to tighten economic and regulatory controls on Russia amid ongoing geopolitical tensions.
Observers note that this designation adds a layer of complexity for multinational financial institutions with operations both inside and outside the EU. Unlike FATF’s global listing, the EU’s high-risk classification mandates institution-wide changes to AML policies and compliance procedures for any entity subject to EU law.
Beyond financial institutions, the designation affects professional services and any businesses that fall under the EU’s anti-money laundering obligations. This means legal firms, real-estate professionals, trust service providers, and other regulated sectors must also sharply increase their risk awareness and documentation when dealing with any Russia-linked clients or transactions.
Implications for EU Financial System Integrity
By identifying Russia as a high-risk jurisdiction, the EU aspires to strengthen the internal market’s resilience against financial crime threats, including money laundering, terrorist financing, organised crime and sanctions evasion. Enhanced scrutiny and due diligence are intended to ensure that the EU financial system is less vulnerable to illicit flows that could originate in or pass through jurisdictions with weak regulatory controls.
Additionally, the decision highlights the increasingly interconnected nature of geopolitics and financial governance. The EU’s approach signals that geopolitical behaviour, especially when associated with weak compliance and potential conflict-related financial risks can influence AML/CFT risk assessments and regulatory decisions.
The European Commission’s designation of Russia as a high-risk jurisdiction for money laundering and terrorist financing represents one of the most consequential updates to the EU’s anti-money laundering policy in recent years. The move, grounded in legal authority under the EU’s AML directive and driven by a detailed technical assessment, requires EU-regulated entities to adopt stricter compliance controls and enhanced vigilance for Russia-linked risks.
The decision highlights the EU’s commitment to safeguarding the integrity and security of its financial system and reflects a broader trend of aligning financial crime policy with geopolitical realities. As the measure moves through the EU’s legislative review process, its full implementation will bring tangible regulatory challenges and operational changes for financial institutions and professional service providers operating within the EU.
