01 July 2016
The European Commission is due to adopt this Friday a list of 11 "high risk [non-EU] countries with strategic deficiencies in their anti-money laundering/countering terrorist financing", establishing for the first time a common EU list of countries to which financial institutions will have to apply "enhanced customer due diligence measures when establishing business relationships or carrying out transactions with natural persons or legal entities established in listed countries."
According to draft documents obtained by Statewatch, the countries to be placed on the list are:
See: Commission Delegated Regulation (EU) .../... of XXX supplementing Directive (EU) 2015/849 by identifying high-risk third countries with strategic deficiencies (pdf) and: Annex to the Commission Delegated Regulation (pdf)
The countries match those recently identified by the Financial Action Task Force (FATF, see here and here), an inter-governmental body that was set up by the G7 group of states in the early 1990s to address money laundering, but by the end of that decade had also taken on the role of "countering terrorist financing".
The Commission's explanatory memorandum notes, however, that it is "free to go beyond the current requirements set by FATF either by keeping a third country on its list, even if de-listed by FATF, or by including additional third countries."
The list of eleven states is divided into three categories - the first nine are: "High-risk third countries which have provided a written high-level political commitment to address the identified deficiencies and have developed an action plan with FATF."
Iran is considered a "high-risk third country" which has "provided a high-level political commitment to address the identified deficiencies, and [has] decided to seek technical assistance in the implementation of the FATF Action Plan."
North Korea, meanwhile, presents "ongoing and substantial money laundering and terrorist financing risks, having repeatedly failed to address the identified deficiencies."
Bosnia and Herzegovina - one of the nine that has made a "high-level political commitment to address the identified deficiencies" - has for some time been a country of concern for the FATF and its regional sub-group covering eastern and central Europe, the MONEYVAL committee of the Council of Europe.
MONEYVAL's efforts to ensure compliance with FATF standards was investigated in more detail in a 2015 report prepared by Statewatch, which amongst other things noted that pressure from MONEYVAL led the BiH government to override a parliamentary vote in order to establish new rules regarding non-profit organisations and their alleged vulnerability to abuse for terrorist financing purposes. See: Countering terrorism or constraining civil society? The impact of Financial Action Task Force recommendations on non-profit organisations in Central and Eastern Europe and Asia
The Commission's power to adopt a common list that applies to financial institutions across the EU stems from the Fourth Anti-Money Laundering Directive, which was adopted in May 2015 and which the Commission last week proposed to amend to introduce new powers against money laundering and terrorist financing.
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