UK Aligns List of High-Risk Third Countries with FATF

UK’s HM Treasury has issued an advisory notice outlining the adjustments made to the definition of high-risk third countries (HRTCs). The notice, updated on 22 January 2024,  also emphasizes the risks posed by countries that have insufficient measures against money laundering & terrorist financing.

The update implies that any country flagged by the Financial Action Task Force (FATF) as high risk or under increased monitoring will automatically be categorized as a High-Risk Third Country under the Money Laundering Regulation.

To stay updated on which countries are considered HRTCs, relevant persons must refer to the lists released by FATF, which includes ‘Jurisdictions Under Increased Monitoring’ and ‘High-Risk Jurisdictions subject to a Call for Action’.

Enhanced Due Diligence for Customers in High-Risk Third Countries

Following Regulation 33(1)(b) of the money laundering regulations, businesses are required to conduct enhanced due diligence (EDD) and increased ongoing monitoring while developing business relationships with individuals from High-risk third countries. Furthermore, the regulation extends to relevant transactions, calling for increased scrutiny of transactions involving parties from HRTCs.

It indicates that relevant persons are obligated to conduct thorough checks and carefully monitor every customer, both new and existing, from HRTCs. Under regulation 33(3A), the obliged individuals can adopt a risk-based approach while conducting enhanced due diligence on existing customers.

In compliance with regulation (33)(6)(c), relevant persons should also take into account which existing customers have undergone EDD and ongoing monitoring owing to higher geographical risk. This is crucial while figuring out what actions are further required for these customers.

List of High-Risk Third Countries

Reflecting on the most recent FATF statements, HM Treasury recommends that businesses should consider the following jurisdictions as high-risk under the MLRs Regulation 33;

The following jurisdictions are presently subjected to financial sanctions, prompting businesses to take proactive measures;

The Money Laundering, Terrorist Financing, and Transfer of Funds (Information on the Payer) Regulations 2017 (MLRs) mandate businesses to establish policies and procedures in place to deter financial crimes and mitigate them effectively. Businesses governed by UK regulations must stay updated with the latest updates and adapt their compliance procedures accordingly.

Also read: UK Treasury Increases DAML SAR Threshold from £250 to £1,000