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US criticises EU's extended money laundering blacklist

Thursday, 14 February, 2019

The European Commission has adopted a new blacklist of non-EU countries alleged to have weak anti-money laundering regimes, extending it from 16 to 23 countries.

The list has grown because of stricter criteria imposed by the EU Fifth Anti-Money Laundering Directive, particularly relating to the availability of information on beneficial ownership of companies or other legal entities that may be used to hide the real beneficiaries of a transaction, including for tax evasion, said the Commission.

Its blacklist takes the official form of a Delegated Regulation to be submitted to the European Parliament and Council for approval within one month, with a possible one-month extension. Once approved, the Regulation will be gazetted in the Official Journal of the European Union and enter into force 20 days later. After that, EU financial institutions will have to apply increased due-diligence checks on customers and financial bodies in these high-risk third countries.

The 23 jurisdictions are: Afghanistan, American Samoa, the Bahamas, Botswana, North Korea, Ethiopia, Ghana, Guam, Iran, Iraq, Libya, Nigeria, Pakistan, Panama, Puerto Rico, Samoa, Saudi Arabia, Sri Lanka, Syria, Trinidad and Tobago, Tunisia, the US Virgin Islands, and Yemen. Only 12 of these are named by the Financial Action Task Force (FATF) in its corresponding list of countries with strategic money laundering deficiencies.

Several US overseas territories are included on the EU list, drawing sharp criticism from Washington. The US Treasury Department issued a statement expressing 'significant concerns about the substance of the list and the flawed process by which it was developed'. It noted that FATF is the global standard-setting body for money laundering assessments.

The EU's process, said Washington, did not include a sufficiently in-depth review; provided listed jurisdictions with only a cursory basis for its determination; gave the listed jurisdictions only a few days’ notice; and did not give them any meaningful opportunity to challenge their inclusion.

As a result, the European Commission 'produced a list that diverges from the FATF list without reasonable support,’ said the US Treasury statement. It explicitly rejected the inclusion of American Samoa, Guam, Puerto Rico, and the US Virgin Islands on the EU list, and said it does not expect US financial institutions to take the list into account in their money laundering procedures.

Panama also objected to its inclusion. Its president, Juan Carlos Varela, issued a statement warning that Panama's diplomatic representative to the EU, Miguel Verzbolovskis, would be called back for consultations about it. 'Panama was not given the opportunity to report or respond on the actions taken in legislation and practice, to address any deficiency perceived by the Commission', said the statement.

EU justice commissioner Vera Jourova said the EU had 'established the strongest anti-money laundering standards in the world'. She invited the countries listed to remedy their deficiencies swiftly and apply to be removed, as Bosnia-Herzegovina, Guyana, Lao PDR, Uganda and Vanuatu already have been.