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Bulgaria, Cameroon, Croatia, Nigeria, South Africa and Vietnam have been added to the list of high-risk countries specified in the UK money laundering regulations. At the same time, Albania, Cayman Islands, Jordan and Panama have been removed. The changes – which have come into effect immediately – mean that you may need to adjust your financial crime processes to remain compliant.
The Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017, known as the MLRs, require the UK-regulated sector to apply enhanced customer due diligence in relation to high-risk third countries. A high-risk third country is defined for these purposes as a country specified in Schedule 3ZA. Firms should also consider high-risk third parties as part of their Customer Risk Assessment and Business-wide Risk Assessment.
The statutory instrument issued by His Majesty’s Treasury came into force as of 5 December 2023 and substitutes the list of high-risk third countries specified in Schedule 3ZA of the MLRs with a new list. This list aligns and will continue to align with both the Financial Action Task Force’s (FATF) ‘Jurisdictions under increased monitoring’ and ‘High-risk jurisdictions subject to a call for action’ documents. Schedule 3ZA consolidates these lists into a single list of countries. These countries have significant shortcomings in their anti-money laundering, counter terrorist financing and counter-proliferation financing controls. Specifically, this update will add Bulgaria, Cameroon, Croatia, Nigeria, South Africa and Vietnam and remove Albania, Cayman Islands, Jordan and Panama from Schedule 3ZA to reflect changes in FATF lists.
Changes you may need to make to meet the updated rules
You should consider the steps you need to undertake to meet your obligations, against your risk-based approach when risk assessing your customers as this may impact those situations when you need to apply EDD to either new or existing customers. This could mean the level of detail you go to, or the type of verification you undertake may be more stringent. For example, you may need to look at prioritising higher-risk customer groups or adjusting the level of information gathered.
The level of enhanced customer due diligence and enhanced ongoing monitoring undertaken should be proportionate to the level of risk attributed to the customer. This will differ between institutions, and between customers depending on other risk factors present. As part of this, you should consider factors such as the specific shortcomings mentioned by the FATF, and the risk typologies most relevant to the jurisdiction in question.
The changes made may also impact for your firm’s risk assessments, in which country and jurisdiction risk are an important and required factor. On that basis, we encourage you to review your current risk assessments and update them where applicable, reflecting the recent changes.
You should also ensure that your team is familiar with these new requirements and that your due diligence and ongoing monitoring processes are adjusted accordingly. You may also need to consider changes to your AML transaction monitoring systems.
We can help
We understand that these changes may require internal review as well as adjustments to your current practices. Our team is available to provide guidance and support as you navigate these changes. Please don’t hesitate to reach out if you have any questions or need further clarification.
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