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.”

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.

According to draft documents obtained by Statewatch, the countries to be placed on the list are:

1. Afghanistan
2. Bosnia and Herzegovina
3. Guyana
4. Iraq
5. Lao PDR
6. Syria
7. Uganda
8. Vanutatu
9. Yemen
10. Iran
11. Democratic People’s Republic of Korea (North Korea)

The countries match those recently identified by the Financial Action Task Force – however the Commission’s explanatory memorandum notes, 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.”

See:

1. Commission Delegated Regulation (EU) …/… of XXX supplementing Directive (EU) 2015/849 by identifying high-risk third countries with strategic deficiencies (pdf)
   16. http://statewatch.org/news/2016/jul/eu-com-money-laundering-terrorist-financing-draft-reg-7-16.pdf
2. Annex to the Commission Delegated Regulation (pdf)
   16. http://statewatch.org/news/2016/jul/eu-com-money-laundering-terrorist-financing-draft-reg-annex-7-16.pdf

The list of eleven states is divided into three categories –

1. 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.”
   1. 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.
2. 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.”
3. North Korea, meanwhile, presents “ongoing and substantial money laundering and terrorist financing risks, having repeatedly failed to address the identified deficiencies.”