Published: February 22 2011 18:31 | Last updated: February 22 2011 18:31

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Argentina will learn on Wednesday whether it is to be branded as a country which fails to fight money laundering – a move which would deal a major blow to a business reputation it is trying to rebuild a decade after the biggest sovereign default in history.

José Sbatella, who heads the Argentine government’s Financial Information Unit, which spearheads the fight against financial crime, acknowledged that the global body charged with setting standards for fighting money laundering may not be convinced by Argentina’s record.

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That body, the Financial Action Task Force, whose 36 members include most of the G20 countries, in December issued a stinging report in which it said the Argentine government did not fully comply with 47 of its 49 recommendations on fighting money laundering and terrorist financing.

It said Argentina’s progress was hampered by “a lack of adequate coordination, overlapping jurisdictions of a number of domestic agencies and varied and inconsistent requirements” for combating such crimes, and gave it until February 23, during the FATF’s plenary meeting at its Paris headquarters, to put its house in order.

“We have done everything we can to avoid being put on the ‘grey list’, but it could happen,” Mr Sbatella told the Financial Times.

The FATF identifies Iran and North Korea as the countries posing the greatest risk to the international financial system from money laundering and terrorist financing. But it also has a so-called grey list of 31 countries with “strategic anti-money laundering or combating the financing of terrorism deficiencies”. That list includes South American countries Venezuela, Bolivia, Ecuador and Paraguay; G20 member Turkey; EU member Greece; plus others including Syria, Kenya and Thailand. Such countries develop an action plan with the FATF and their progress is monitored.

Mr Sbatella said he hoped a recent FATF mission to Argentina noted the new political willingness to tackle financial crimes and the structural, legislative and procedural changes Argentina has put in place to remedy its shortcomings.

But he noted: “For them, putting us on the grey list is a possibility. The outcome is open.”

Argentina, a country with a long history of tax evasion and where as much as $20bn in black money circulates through the highly cash-based economy every year, has tightened procedures in a number of areas, including credit card transactions and art dealing, Mr Sbatella noted.

In addition, Argentina can now point to the first conviction for money laundering since the agency was established a decade ago, enhanced powers, greater cooperation with the judiciary in investigations, plus several fines of banks for failing to comply with proper procedures.

Mr Sbatella, who said he encountered a “paper-pushing” and “minimalist” vision of the agency’s potential when he took the helm in January 2010, has doubled its staff and says Argentina tackled the “hard core” of the problems identified.

“We think the FATF has to see this is on its way to being resolved,” he concluded.