UK Mandates Enhanced Due Diligence on High-Risk Jurisdiction

Authorities in the UK rolls our new regulatory measures to perform enhanced due diligence for higher-risk countries.

The Money Laundering and Terrorist Financing (Amendment) Regulations 2019 obligates the regulated sector of the UK to apply due-diligence on the countries that have high risks attached to them regarding money laundering and terrorism financing. 

Section 33 (1) (b) of the Money Laundering and Terrorist Financing (Amendment) Regulations 2019 says to apply enhanced due diligence of customers and to perform enhanced on-going monitoring of customers or businesses that are associated with a high-risk third country. The on-going monitoring must also be done to any transactions where any of the parties involved in the transaction is in a country with a high risk of money laundering. 

The new amendments of the Money Laundering and Terrorist Financing regarding the high-risk jurisdictions have been passed in 2021. The new amendments remove references that were listed by the European Commissions as the high-risk third jurisdiction. It now defines the third countries with high-risk as the countries that are highlighted in a new schedule 3ZA to the MLRs. This list contains the same countries that were provided in the list by the Financial Action Task Force (FATF) as high-risk countries that require increased on-going monitoring. 

The regulations explain that: 

• Under section 27 of the regulation, a transaction to which the concerned person must apply customer due diligence measures is known as a relevant transaction
• Belonging to an established country means if the person is legal and has the principal place of business in that country or in the case of a financial institution, the main regulatory authority of the country 
• In the case, if a person is a resident of the country but was not born in the country the enhanced due diligence is mandatory 

The new amendments of the Money laundering and Terrorist Financing (33) (6) (C) obligate that the relevant person must consider the geographical risk factors while assessing the risk. They should also consider the geological risk factors while figuring out the extent of measures that must be taken in order to manage and stop the risks. 

The risk factors are stated as “including whether a country is identified by a credible source, including reports published by the Financial Action Task Force (FATF), as not implementing requirements to counter money laundering and terrorist financing that are consistent with FATF recommendations.”