Vera Jourova, EU justice commissioner

The European Union will reveal a new methodology for its anti-money laundering blacklist of third countries by October. A previous blacklist was blocked by EU governments after a diplomatic row over the listing of Saudi Arabia and four US overseas territories.

EU justice commissioner Vera Jourova told the Financial Times that by October the incoming commission would release a new methodology to target overseas jurisdictions that fail to properly tackle money laundering and terrorist financing risks.

Jourova released a draft dirty money blacklist of 23 non-EU countries in February 2019 that included countries like Saudi Arabia, Panama and Nigeria, which, the commission said, had strategic deficiencies in their anti-money laundering regimes.

A month later, EU governments rejected the list after heavy lobbying by Saudi Arabia and the United States. EU governments criticised the way countries were selected for their alleged anti-money laundering deficiencies and the short notice given to listed to respond to the findings.

Under the process, the EU Commission had first shortlisted 54 countries, including the Cayman Islands, based on their economic ties with the EU, their potential systemic impact on the integrity of the EU financial system and whether they were classed by the International Monetary Fund as offshore financial centres.

For each shortlisted country the Commission then assessed the level of existing threats, the legal framework and controls put in place to prevent money laundering and terrorist financing risks, and their effective implementation. The Commission said it had also considered the work of the Financial Action Task Force, the international standard-setter in anti-money laundering.

In addition to the 12 countries listed by the FATF, the Commission had planned to add another 11 jurisdictions.

Jourova said the new methodology has been developed together with EU governments, who claimed they had previously not been sufficiently involved.

Another point of criticism was the lack communication with the third countries that were likely to be listed.

“We have admitted this point and said we need to communicate earlier with the states that might appear on the list. That is why we are now reviewing the methodology,” Jourova told the FT.

This new methodology is likely to yield different results, the EU commissioner said, adding that she is still convinced that it was right to list Saudi Arabia. The new criteria will take into account that not all jurisdictions present the same level of risk rather than one-size-fits-all approach.

The new dirty money list might also introduce a grey list of countries that agree to make the changes recommended by the EU.

With its anti-money laundering blacklist, the EU Commission is effectively pulled in opposing directions by EU members states aiming to avoid a diplomatic fallout on the one side and EU parliamentarians on the other, who would rather see an expanded list.

Being listed on the EU blacklist would have severe consequences for countries as it requires banks in the EU to apply enhanced due diligence measures concerning all transactions involving individuals and entities from listed countries.

The Cayman Islands government is in the process of implementing recommendations made by the Caribbean Financial Action Task Force following its assessment of Cayman’s anti-money laundering framework, published in March of this year. Cayman has until February 2020 to remedy the identified shortcomings or face a potential blacklisting by the FATF.

1 COMMENT

  1. So the main factor is politics and not actual financial threats? Wow, the EU is being revealed as a bully once again. So as of October all BOT’s will be on this new list. Funny how this is announced once the British start being firm on Brexit on the 31st. Convenient perhaps..

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