On 1 October 2019, the General Secretariat of the Council of the EU (the Council) published a European Commission (Commission) non-paper on key elements of a refined methodology for identifying high-risk third countries under Directive (EU) 2015/849 (the Fourth Anti-Money Laundering Directive).
Following the rejection by the Council of the most recent Delegated Regulation identifying high-risk third countries with strategic deficiencies in their anti-money laundering (AML) and counter terrorist financing (CTF) regimes earlier this year, the Commission has been working to address the Council’s concerns regarding the transparency of and inclusion of the third countries concerned in the decision process.
The non-paper reports that the refined methodology for identifying high-risk third countries draws on some of the elements of the Financial Action Task Force’s (FATF’s) approach to determining high risk countries. It should hopefully introduce a more engaging and open process.
Its key stages are:
- more streamlined interaction between the EU and FATF – while the FATF-listed third countries will also be listed by the EU, the EU may choose, based on the specific EU AML/CTF requirements such as the threat the country is posing to the EU or its beneficial ownership transparency requirements, to also include countries which have been de-listed by the FATF;
- greater engagement with third countries concerned – the EU would consult third countries on its initial findings, draft specific benchmarks to help them address any challenges in meeting the EU’s AML/CTF requirements and seek their commitment to implementing specific corrective measures. Only those third countries who fail to address the concerns within 12 months from the benchmark being issued will be included in the list; and
- Member States will now be consulted at every stage of this process.