EU Money Laundering Blacklist Could ‘Undermine’ FATF, Group President Says

By Gabriel Vedrenne

A final proposal by the European Union’s executive branch to blacklist 23 jurisdictions with weak controls against financial crime drew criticism from the head of the Financial Action Task Force, or FATF, following the conclusion of the group’s summit in Paris.

On Feb. 13, the European Commission adopted a plan to add 23 non-EU jurisdictions, including four U.S. territories, to the bloc’s new list of countries with deficient anti-money laundering and counterterrorist financing rules, and thus require more due diligence on clients and financial institutions hailing from them.

Responding to a question from ACAMS during a call with reporters Friday, FATF President Marshall Billingslea, who also serves as a senior deputy with the U.S. Treasury Department’s Office of Terrorism and Financial Intelligence, said he was “very concerned” the EU blacklist could “undermine the leading role of this organization.”

“I have to insist on … preserving the central role of FATF as the leading body on AML [anti-money laundering] and CFT [combating the financing of terrorism] standards worldwide,” Billingslea said. “There are obvious questions as to whether lists created outside of FATF or without our involvement help or actually undermine the leading role of this organization.”

Compared to FATF’s own list of 13 high-risk nations, the proposed EU list names 11 additional countries, including Saudi Arabia, Panama, Nigeria and Tunisia, as well as the U.S. territories of American Samoa, Guam, Puerto Rico and the U.S. Virgin Islands.

Serbia, which is in negotiations to join the European Union, appears on FATF’s list but was not included by the Europeans.

The list must still gain approval from the European Parliament and EU nations but has already provoked strong reactions from the targeted countries and above all the United States, where Treasury officials said last week that they do not expect U.S. financial institutions to observe it.

Billingslea, who has continued in his role as assistant secretary of terrorist financing with the Treasury Department after taking the helm of FATF in July, seemed to reiterate U.S. concerns Friday, opining that blacklists “have to be handled carefully” and “should only be elaborated on the basis of a robust and transparent methodology.”

At the conclusion of the summit, FATF separately announced the designation of Cambodia as a jurisdiction with poor controls against financial crime and the continued suspension of countermeasures against Iran after the country’s adoption of AML reforms.

Global coalitions fracturing?

As for the list, Emmanuel Genequand, a senior consultant for PwC in Switzerland, said the exclusion of certain nations, including Eastern European nations prone to financial crime, may “open the door to political rather than technical judgments” going forward and further threaten global alliances against money laundering.

“By imposing different standards, both in terms of methodology and results, the EU pulls the rug from under FATF’s feet and in the end makes it less credible,” Genequand said. “We already see countries such as the United States moving away from international organizations, it is a little worrying to see the EU doing the same.”

Others have accused FATF of allowing its evaluation process to play second fiddle to the national interests of powerful members, shielding them and key allies from rigorous critiques.

Certain criticisms of the United Kingdom’s AML regime found in an earlier report on FATF’s evaluation of the country did not appear in the final version in December, indicating that British officials successfully lobbied for their removal, reported that month.

In December 2010, former U.S. officials and other sources interviewed by questioned the exclusion of Saudi Arabia from FATF’s blacklist in light of the country’s failure to prevent the flow of funds to terrorist groups in the Middle East and South Asia.

EU officials said this month that they had based their list in part on FATF’s list of high-risk jurisdictions, and described the intergovernmental group as “the international standard-setter in this field.”

“The Commission developed its own methodology to identify high-risk countries, which relies on information from the Financial Action Task Force, complemented by its own expertise and other sources such as Europol,” officials said.

Corporate and financial transparency advocates contacted by welcomed the EU list for sparking a debate into the FATF’s process for evaluating countries and publishing the results.

“Consistent input from civil society on FATF country reviews would go a long way towards legitimizing and strengthening the group’s overall assessment approach,” Maira Martini, an analyst with Transparency International in Berlin, said. “This would also diminish the risk of political influence on the outcomes.”

But the practical, near-term impact of the EU list on financial institutions, correspondent banking and de-risking remains to be seen.

Financial institutions will probably have to apply the highest levels of scrutiny when dealing with EU-blacklisted nations, but the Commission’s proposal may still have an overall positive effect on FATF, Emma Radmore, an attorney with Womble Bond Dickinson in London, said.

“The Commission was taking into account factors beyond whether the relevant countries had strong AML laws and supervision in place,” Radmore said. “In that respect, it’s covering more territory than FATF and perhaps approaching some assessments from a different angle.”

Contact Gabriel Vedrenne at

Topics : Anti-money laundering , Counterterrorist Financing
Source: FATF , European Union
Document Date: February 22, 2019