High-risk and other monitored jurisdictions

The Financial Action Task Force (FATF) maintains a list of high-risk and other monitored jurisdictions, sometimes known as the “grey list.” Regulated entities in the UK need to pay attention to this list, as under Regulation 33 of the Money Laundering Regulations, firms are obliged to carry out Enhanced Due Diligence where “either of the parties to the transaction is established in a high-risk third country.”

His Majesty’s Treasury (HMT) and His Majesty’s Revenue and Customs (HMRC) do update their guidance to reflect changes, although they’re not obliged to and are not always as “on it” as we might like.

In August, HMRC reminded supervised entities that Turkey and Jamaica had been removed from the grey list in June. However, they neglected to mention that Monaco and Venezuela had been added—or “recognised” in the wording of FATF.

The MLRs offer clear direction for “established in a high-risk third country.” “In the case of an individual, being resident in that country, but not merely having been born in that country.”

But what additional due diligence is required? Again, the regulations are clear:

“(a) obtaining additional information on the customer and on the customer’s

beneficial owner;

(b) obtaining additional information on the intended nature of the business

relationship;

(c) obtaining information on the source of funds and source of wealth of the

customer and of the customer’s beneficial owner;

(d) obtaining information on the reasons for the transactions;

(e) obtaining the approval of senior management for establishing or continuing

the business relationship;

(f) conducting enhanced monitoring of the business relationship by increasing

the number and timing of controls applied, and selecting patterns of

transactions that need further examination.”;

Most businesses are unlikely to have much contact with individuals or companies on the grey list. However, that doesn’t mean they should not have up-to-date policies and procedures. Keep abreast of FATF Increased Monitoring here. Or - let Lime do it for you. Sign up for our newsletter here.