The European Union (EU) released a “dirty money” blacklist on February 13, 2019, which is a list of countries perceived as deficient in anti-money laundering (AML) regulation and enforcement. The new additions are part of efforts by the EU to strengthen their money laundering and terror financing guidance after the publication of the Panama and Paradise Papers. Two United States territories, American Samoa and Puerto Rico were added to the money laundering blacklist, joining Guam and the U.S. Virgin Islands, categorizing them alongside Iran, Syria, and North Korea. In response to the EU update, the U.S. Treasury Department (Treasury) has advised American financial institutions that they can ignore the updated EU list when administering their AML programs, questioning the methodology used in compiling the list.
Treasury stated that it “has significant concerns about the substance of the list,” as the European Commission didn’t include in-depth analysis and only gave a cursory basis for the determination. Additionally, the U.S. wasn’t given a meaningful chance to discuss their inclusion on the list, noting that U.S. territories are subjected to the same high AML standards as the rest of the country. Treasury further stated that the Financial Action Task Force (FATF) is the global standard for combating money laundering and terror financing, and their high-risk jurisdiction list should be used for American institution’s AML programs enhanced due diligence.
The EU believes that the FATF list is becoming questionable and more politicized, thus their formulation of its own blacklist requiring European banks to establish enhanced due diligence for countries on their updated list.
Other countries added to this list, many of which were already on an EU tax haven list, are:
- Afghanistan
- The Bahamas
- Botswana
- North Korea
- Ethiopia
- Ghana
- Iran
- Iraq
- Libya
- Nigeria
- Pakistan
- Panama
- Samoa
- Saudi Arabia
- Sri Lanka
- Syria
- Trinidad and Tobago
- Tunisia
- Yemen
American institutions have the option of adding any jurisdiction to their internal watch list based on the risk appetite of the institution. Although watchlist additions beyond the FATF list are not required, it may be prudent for certain institutions with concentrated risk in certain areas. The European Commission states that they will continue to monitor other jurisdictions, including the United States and Russia.
