The European Commission published its new list of third countries with strategic deficiencies in its anti-money laundering and counterterrorist financing frameworks.
The list was created after analyzing 54-priority jurisdictions using the EU’s criteria as set in directive (EU) 2015.849 as amended by Directive (EU) 2018/843, which was prepared by the commission.
The countries were reviewed based on the following criteria:
- those that have a systemic impact on the integrity of the EU financial system;
- those identified by the International Monetary Fund as international offshore financial centers; and
- those with economic relevance and strong economic ties with the European Union.
“Tell me and I forget, teach me and I may remember, involve me and I learn.”
Benjamin Franklin
The objective of identifying high risk-third countries on AML/CFT is to protect the integrity of the Union financial system and internal market through the application of enhanced due diligence (EDD) measures by obliged entities when they have a business relationship involving high-risk third countries.
Flows of illicit money can damage the integrity, stability and reputation of the financial sector and threaten the internal market. This is particularly relevant since risks posed by countries having strategic deficiencies may easily spread across jurisdictions and ultimately impact the stability of the financial system of their counterparts.
Therefore, it is key to ensure that appropriate controls are in place to mitigate such risks.
You get to a point where it gets very complex, where you have money laundering activities, drug related activities, and terrorist support activities converging at certain points and becoming one.
The EU emphasizes that the purpose is not to “name and shame” third countries. Rather, the list will help to ensure that the jurisdictions concerned address identified deficiencies. Listed countries have been encouraged to rapidly address their identified strategic deficiencies and the Commission is committed to supporting them where appropriate, with a view to their eventual de-listing on the basis of the clear criteria set out in the methodology, including through technical assistance.
Pursuant to the amended Directive, the Commission takes into account strategic deficiencies of third countries, in particular in relation to the legal and institutional AML/CFT framework such as criminalization of money laundering and terrorist financing, customer due diligence and record keeping requirements, reporting of suspicious transactions, the availability and exchange of information on beneficial ownership of legal persons and legal arrangements; the powers and procedures of competent authorities; their practice in international cooperation; the existence of dissuasive, proportionate and effective sanctions.
The Commission’s analysis has concluded that 12 jurisdictions present strategic deficiencies as defined for the purposes of Article 9 of Directive (EU) 2015/849. Those jurisdictions include: The Bahamas, Botswana, Ethiopia, Ghana, Iran, Democratic People’s Republic of Korea, Pakistan, Sri Lanka, Syria, Trinidad and Tobago, Tunisia, Yemen.
Based on the review of additional information sources, the Commission’s analysis has concluded that 11 additional jurisdictions present strategic deficiencies for the purposes of Article 9 of Directive (EU) 2015/849. Those jurisdictions are the following: Afghanistan, American Samoa, Guam, Iraq, Libya, Nigeria, Panama, Puerto Rico, Saudi Arabia, U.S. Virgin Islands, Samoa.
“Government has coddled, accepted, and ignored white collar crime for too long. It is time the nation woke up and realized that it’s not the armed robbers or drug dealers who cause the most economic harm, it’s the white collar criminals living in the most expensive homes who have the most impressive resumes who harm us the most. They steal our pensions, bankrupt our companies, and destroy thousands of jobs, ruining countless lives.”
― Harry Markopolos
Next steps and follow-up
The commission has communicated the grounds for the listing to the countries involved as well as delisting criteria. This will enable third countries to identify the areas for improvement in order to pave the way for a possible delisting once strategic deficiencies are removed.
Here is the detailed report to Nigeria on its deficiencies.
In that light we recommend that the authorities follow guidance as provided by the commission and request for more support both technically and politically to provide her with more assistance on how to repair the current state of affairs and resolve the deficiencies so the country can be delisted.
