Following the rejection by the Council of the European Union (“the Council”) on 07 March 2019 of a draft list of 23 high-risk countries, as proposed in February 2019 by the European Commission in accordance with Article 9 of Directive (EU) 2018/843 on the prevention of the use of the financial system for the purposes of money laundering or terrorist financing (AMLD5), the Commission’s services have been working to amend the methodology used to identify such high-risk third countries. The proposed revised approach was presented to Member States representatives during a meeting on 05 June 2019 in Brussels.

Article 9 AMLD5 strengthens the criteria on the basis of which the Commission is required to identify high-risk third countries, by applying requirements going over and beyond the criteria set out by the Financial Action Task Force (FATF). The criteria set out in Article 9 AMLD5 are designed to take into the account “strategic deficiencies” of a third country in three broad areas:

  1. The legal and institutional AML/CFT framework of a third country;
  2. The powers and procedures of the third country’s competent authorities for the purposes of combating money laundering and terrorist financing;
  3. The effectiveness of the third country’s AML/CFT system in addressing these risks.

In a statement following the March 2019 rejection of the proposed list, Member States publically stressed the alleged lack of transparency and resiliency of the process, including lack of measures for “affected countries to take decisive action while also respecting their right to be heard”. Unofficially, heavy lobbying by certain third countries included on the Commission’s February 2019 draft list, is understood to have had a substantive impact on the Council’s decision.

As presented during the meeting last week, the Commission intends to consult broadly with Member States on the preparation of the revised methodology, and to simultaneously engage with the FATF. In principle, the FATF’s list of high-risk third countries will be considered a baseline for the Commission’s assessment. In order to improve transparency of the process and engagement with third countries concerned throughout, the Commission is considering a staged approach whereby it would:

  1. Consult them on preliminary findings;
  2. Draft country-specific benchmarks to address each country’s shortcomings;
  3. Seek third-countries’ commitments to implement specific corrective measures before the listing is finalised.

The Commission intends to finalise the new methodology and to publish the revised list of high-risk third countries in Q3/Q4 2019.