The European Commission has adopted a new list of 23 countries which lack appropriate framework for anti-money laundering and counter terrorist financing.
On February 13th, the EC published its report on the state of AML; threats and possibilities. Iran, Iraq, Saudi Arabia, Puerto Rico, Pakistan, Sri Lanka, and North Korea are among the exhaustive list. According to EC, these territories “pose significant threat” to the financial and trade ecosystem due to key strategic flaws. The U.S. Department of the Treasury has highly criticised EC’s inclusion of four American territories; Puerto Rico, Guam, American Samoa and the US Virgin Islands under the high risk category.
In a continuity of political backlash, Panama has termed its inclusion to the list as “unfair punishment”.
The U.S. Treasury Department published a press release on the same day stating the evaluation process and methodology adopted by EC to be questionable. The process of developing the list lacks an in-depth review to perform assessment. The countries added to the list were informed only a few days before publication of the report. The official commentary does not include a substantial guide to improve measures or appeal for exclusion from this list. Even the assessment seems to be perfunctory.
The Department quotes FATF; globally recognised standards body for AML/CFT as a benchmark for assessment procedures. Compared to FATF’s legally and research intensive methodology as well as dialogue formulation with territories, EC’s report appears deficient in terms of data, information, and method. The body goes on to reject the report. It announced that U.S. is committed to the AML/CFT standards as set forth by the FATF and will go on to ensure strict compliance with them. The Department has further intimated that U.S. financial institutions are under no legal restrictions to entertain or acknowledge EC’s findings.
The EC member states United Kingdom and France have already expressed their strong concerns over the publication of list by EC. The countries have strong trade and economic ties with list additions such as Saudi Arabia. The Saudi representatives regrets country’s inclusion to the list. Media, however, is discussing possible outcomes that could threaten the Vision 2030 investment.
As of now the EC has not made any further comments in this regard. The list compiled by EC is submitted for final approval by European Parliament and Council. After which it will officially come into force.
Studies show that USD 2 Trillion is laundered through AML software for banking systems. As compliances are growing stricter the need to improve AML/CFT measures by organisations is stronger than ever.