The European Commission is reintroducing its proposal to create an EU blacklist of countries that pose a high risk of fraud and money laundering.

 

The plan will be relaunched in October, according to the FT. If adopted, it will force European banks to apply tighter controls on transactions with customers and institutions in those nations.

The register was launched in February when the Commission published an earlier list of countries that it believed were not sufficiently tough on money laundering and terrorist financing.

However, it became mired in political infighting when the list not only included countries identified by the Financial Action Task Force’s (FATF’s) own register, but also Saudi Arabia and four US territories, American Samoa, the US Virgin Islands, Puerto Rico, and Guam.

 

The US Treasury expressed its “significant concerns” about the list and the “flawed process” by which it was developed. It told US financial institutions to ignore it and continue following FATF guidelines.

 

Meanwhile, Saudi Arabia’s King Salman wrote to all 28 EU leaders, warning them that the blacklist undermined the supremacy of the FATF and could affect future trade.
In 2017, EU trade with the kingdom amounted to €143.7 billion – nearly €100 billion of which was made up of EU exports. In 2015 and 2016, EU arms exports alone to Saudi Arabia and its allies amounted to $76.5 billion.

 

Salman expressed his belief that the proposal damaged the EU’s reputation and “made its lists politicised”. Relations between Saudi Arabia and Europe have been strained over human rights issues and the murder of journalist Jamal Khashoggi last year.

In response, key financial centres the UK, Germany, and France claimed that the process by which the original blacklist had been drawn up was not “transparent and credible”, despite the Commission claiming it had the support of all 28 member states. In the end, 27 of those states objected and the proposal was withdrawn.

 

EU Commissioner for Justice, Vera Jourova, said a new methodology will be used to decide which territories are included on the revamped list. However, she told the FT that the February objections from the US and Saudi Arabia were “not easy for [her] to swallow”.

“I believe we honestly did our best to have the methodology right and to have the assessment right,” she added.
Jourova said she was convinced the Commission “did right to list Saudi Arabia,” but suggested the new list is likely to name a different group of territories and allow others to be placed on a grey list of high-risk countries that are cooperating with the EU in tightening controls.
That the fight against financial crime is vulnerable to political interference and economic coercion is no surprise, especially when some ‘approved’ parts of the world, including Denmark and the City of London, have hardly been immune from money laundering in recent years, not to mention banking scandals, market rigging, and fraud.

 

  • The draft Brexit withdrawal agreement with the EU contains a non-binding declaration to the effect that the EU and the UK will continue to work together on AML issues.
  • In related news, Singapore’s central bank is raising its guard against money launderers’ increasing use of onshore shell companies to mask their transactions, according to a Reuters report.

 

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