Ukraine faces 'dirty money' sanctions

Protests against the president are holding up legislation

Ukraine is facing sanctions which could effectively severely limit its access to the international financial system after it failed to toughen up its defences against money laundering.

After more than a year of debate, the parliament in Kiev failed to pass a draft law tightening up rules on the need to report transactions and identify customers.

Earlier this month, the Financial Action Task Force - the main international body that sets standards for the fight against money laundering and terror funding - gave Ukraine till 15 December to clean up its act or face sanctions.

Deputies have not set a date for a return to the debate, which leaves the way open for sanctions to bite.

Similar threats were made last year to Russia, which responded by accelerating its reform programme.

Despite worries about the effectiveness of new legislation, the FATF has now taken Russia off its "blacklist" of potential havens for laundered money.

'Vague' laws

The legislation is caught up in the running battle between supporters of President Leonid Kuchma and his opponents, who allege rampant corruption.

Opposition deputies hold the majority, but they often boycott debates, leaving the pro-government parties short of a quorum.

The opposition says that the anti-money laundering legislation as it is currently worded is too vague to tackle the problem properly without leaving loopholes.

Mr Kuchma is far from universally popular within Ukraine, and large protests have been a frequent sight on the streets of Kiev in recent weeks.