EU methodology for the identification of high-risk third countries

The objective of the EU methodology for the identification of high-risk third countries is to identify jurisdictions which have strategic deficiencies in their national AML/CFT regimes which pose significant threats to the financial system of the Union and hence the proper functioning of the internal market.

The methodology provides that the Commission will consider FATF lists as a starting point and complement this by an autonomous assessment of additional countries using the following approach:

• identify the risk profile and the level of threat to which the country is exposed
• assess the legal framework and its effective application in 8 key areas – by analysing the countries measures on
   
  1. criminalisation of money laundering and countering the financing of terrorism
  2. customer due diligence requirements, record keeping and reporting of suspicious transactions in the financial sector
  3. the same requirements in the non-financial sector
  4. the existence of dissuasive, proportionate and effective sanctions in case of breaches
  5. the powers and procedures of competent authorities
  6. their practice in international cooperation
  7. the availability and exchange of information on beneficial ownership of legal persons and legal arrangements
  8. implementation of targeted financial sanctions

Once high-risk third countries are identified, the Commission adopts a delegated act listing these jurisdictions.

A listing occurs in case jurisdictions are not cooperative (i.e. refusing to express a commitment) or jurisdictions fail to implement the benchmarks within the agreed period. In case there is an overriding level of risk that needs to be mitigated and emergency situations, the Commission reserves the possibility to proceed immediately with identifying strategic deficiencies on the basis of the anti-money laundering Directive.

Here is an overview of the engagement approach with third countries based on an autonomous assessment:

The first version of the methodology was adopted in 2018, and the Commission published a revised methodology in 2020. This revised version ensures that a robust, objective and transparent process is applied.