On July 1, the presidency of the Financial Action Task Force (FATF) passed to Russia. Thus, with no fanfare, the body set up over two decades ago by the United States and other Western countries to lead the global fight against financial crime was placed in the hands of a country where, in the words of a 2012 report of the U.S. State Department, “corruption and financial crimes flourish.” Comprehensive surveillance of banking, business, and personal financial transactions worldwide will now be coordinated by Russia? How did we give the fox the keys to the henhouse on this one? The story of how it happened is a paradigmatic example of good intentions gone awry, with the efforts by the global community to coordinate against a common threat ending up empowering an authoritarian regime that is itself part of the problem.
The FATF is the paradigmatic soft-law regulatory body. Soft law regulation—called soft because it does not have binding effect—is increasingly pervasive in international law. The reasons are rather simple. Voluntary standards are far less costly to establish than binding treaty law since they do not involve the difficult policy decisions required in hard-law regulation. Soft law is viewed as less political, formulated by technocratic civil servants working with relevant domestic agencies rather than diplomats representing state interests in the negotiation of treaties.