On 5th December 2023, HM Treasury unveiled a revised list of high-risk third countries, aligning with the latest recommendations from the Financial Action Task Force (FATF). These changes demand immediate attention from UK-regulated firms, as they impact the application of enhanced customer due diligence (EDD) measures.
Under the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (MLRs), regulated firms are obligated to apply EDD in dealings with entities or individuals established in high-risk third countries. The recent amendments, effective 5th December 2023, are captured in the Money Laundering and Terrorist Financing (High-Risk Countries) (Amendment) (No.2) Regulations 2023, replacing the previous list in Schedule 3ZA of the MLRs.
Updated List of High-Risk Third Countries
The new list, mirroring FATF’s ‘Jurisdictions under increased monitoring’ and ‘High-risk jurisdictions subject to a call for action,’ consolidates these categories into a single list under Schedule 3ZA. Countries such as Bulgaria, Cameroon, Croatia, Nigeria, South Africa, and Vietnam are now included, while Albania, Cayman Islands, Jordan, and Panama have been removed.
This statutory instrument addresses significant shortcomings in anti-money laundering, counter-terrorist financing, and counter-proliferation financing controls. The regulatory guidance necessitates regulated businesses to promptly update their geographical and customer risk assessments to reflect the latest changes.
Full updated list of high-risk third countries:
- Burkina Faso
- Democratic Republic of the Congo
- South Africa
- South Sudan
- United Arab Emirates
Application of enhanced due diligence
Regulation 33(3A) outlines the steps to be taken, emphasising a risk-based approach. Firms must consider specific risks associated with each customer and jurisdiction, tailoring their due diligence processes accordingly. The level of EDD and ongoing monitoring should align with the perceived risk.
Regulated entities must evaluate existing customers who have undergone enhanced customer due diligence and ongoing monitoring due to increased geographical risk. This evaluation is crucial in determining the necessary actions for these customers in light of the updated high-risk third countries list.
Further information and assistance
To ensure compliance, financial institutions must promptly update their control mechanisms, both automated and manual. It’s essential to assess, manage, and monitor customer relationships in line with enhanced due diligence measures. For more detailed information and resources, refer to:
Additionally, Neopay can assist you in ensuring your systems and controls are adhering to the regulatory requirements and provide support in updating your financial crime framework. Contact us here to find out more.