EU’s anti-money laundering country blacklist raises US ire

The US has reacted with fury at the European Commission’s publication of a blacklist of 23 countries, including four overseas US territories, which it says have strategic deficiencies in their anti-money laundering and counter-terrorist financing (AML/CTF) frameworks

As a result of the listing, banks and other entities covered by EU anti-money laundering rules will be required to apply increased due diligence on financial operations involving customers and financial institutions from these high-risk third countries to better identify any suspicious money flows.

The list is based on a new and stricter methodology, which the Commission says reflects the tougher criteria of the fifth anti-money laundering directive in force since July 2018. It includes Saudi Arabia, Nigeria, the Bahamas, Sri Lanka, Trinidad and Tobago, Iran, Iraq, Libya, Pakistan, and Panama, along with American Samoa, Guam, the US Virgin Islands, and Puerto Rico.

Věra Jourová, commissioner for justice, consumers and gender equality said: ‘We have established the strongest anti-money laundering standards in the world, but we have to make sure that dirty money from other countries does not find its way to our financial system.

‘Dirty money is the lifeblood of organised crime and terrorism. I invite the countries listed to remedy their deficiencies swiftly.’

The Commission based the list on an analysis of 54 priority jurisdictions.  The countries assessed meet at least one of the following criteria: they have systemic impact on the integrity of the EU financial system;  they are reviewed by the International Monetary Fund as international offshore financial centres; and they have economic relevance and strong economic ties with the EU.

For each country, the Commission assessed the level of existing threat, the legal framework and controls put in place to prevent money laundering and terrorist financing risks and their effective implementation. The Commission says it also took into account the work of the Financial Action Task Force (FATF), the international standard-setter in this field.

US response

However, the inclusion of four US overseas territories has prompted a strong rebuttal from the US Treasury department, which said it has ‘significant concerns about the substance of the list and the flawed process by which it was developed’.

In particular, the US takes issue with difference between the Commission’s work on the blacklist, and that of FATF.

The Treasury department stated: ‘The European Commission’s process for developing its list contrasts starkly with FATF’s thorough methodology.  First, the Commission’s process did not include a sufficiently in-depth review necessary to conduct an assessment related to such a serious and consequential issue. 

‘Second, the Commission provided affected jurisdictions with only a cursory basis for its determination. 

‘Third, the Commission notified affected jurisdictions that they would be included on the list only days before issuance. 

‘Fourth, the Commission failed to provide affected jurisdictions with any meaningful opportunity to challenge their inclusion or otherwise address issues identified by the Commission.  As a result, the European Commission produced a list that diverges from the FATF list without reasonable support.’

The Treasury department said it rejects the inclusion of American Samoa, Guam, Puerto Rico, and the US Virgin Islands on the list, maintaining the AML/CFT legal framework that applies to the continental US also generally applies to US territories.  It also says the department was not provided any meaningful opportunity to discuss with the European Commission its basis for including the listed US territories.

The Treasury Department states it does not expect US financial institutions to take the European Commission’s list into account in their AML/CFT policies and procedures.

The Commission’s list has been adopted in the form of a delegated regulation which will now be submitted to the European Parliament and Council for approval within one month.

The Commission said it will continue its engagement with the countries identified as having strategic deficiencies and will further engage especially on the delisting criteria, claiming the list enables the countries concerned to better identify the areas for improvement in order to pave the way for a possible delisting once strategic deficiencies are addressed.

The Commission’s delegated regulation is here: https://ec.europa.eu/info/sites/info/files/commission-delegated-regulati...

Report by Pat Sweet

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