EU demands enhanced due diligence on transactions with high-risk nations

The European Union (EU) has warned regulators and trade bodies that businesses and individuals are required to carry out ‘enhanced due diligence measures’ when conducting financial transactions with “high-risk nations”. 

The warning follows the European Commission (EC) updating protocols of the “Regulation on High-risk Third Countries” in December 2022. The mandate identifies high-risk third countries which are deemed to have strategic deficiencies on anti-money laundering (AML) and countering the financing of terrorism (CFT).

Alongside banking and insurance, gambling is recognised as a high-risk sector which requires its related businesses to apply enhanced vigilance of “relationships and transactions involving high-risk third countries.”

The following jurisdictions are identified as having strategic deficiencies in their AML/CFT regimes: Afghanistan, Barbados, Burkina Faso, Cambodia, Cayman Islands, Democratic Republic of Congo, Gibraltar, Haiti, Iran, Jamaica, Jordan, Mali, Morocco, Mozambique, Myanmar, Democratic People’s Republic of Korea, Panama, Philippines, Senegal, South Sudan, Syria, Tanzania, Trinidad and Tobago, Uganda, Vanuatu, United Arab Emirates, and Yemen.

Of significance, the EC latest update on AML/CFT deficiencies saw Gibraltar added to its list of high-risk nations as of March 2023.

In 2022, the Financial Action Task Force (FATF), the financial monitoring agency of the G7 added Gibraltar onto its ‘greylist’ as a jurisdiction which requires increased monitoring of financial transactions.

Gibraltar serves as an operating hub for the online gambling sector, which as of May 2022 is reported to house 45 licences employing a workforce of 2000 employees.

The EC’s monitoring list recognises FATF’s assessments as criteria for its methodology of evaluating high-risk nations. However, the EC maintains that it carries out an “autonomous assessment of nations considering eight key areas in tackling financial crime”.

Regulators and trade bodies across member states have been “reminded for businesses and persons to be vigilant in preventing money laundering and other illicit activities that may originate from high-risk third countries”. 

The EU’s move to update its regulation on “high-risk third countries is in line with its commitment to combat money laundering and terrorist financing activities, as part of its efforts to maintain the integrity and stability of the financial system.”