Few in the general population would link the political unrest in North Africa and the Middle East, which has dominated the headlines so far this year, to money laundering compliance. However, money laundering reporting officers (MLROs) would do well to do so.
Regulation 14 of the Money Laundering Regulations 2007 provides that enhanced due diligence should be applied in any situation that may present a higher risk of money laundering and terrorist financing.
Inclusion on sanctions regimes
Since the start of 2011, individuals from the following jurisdictions have been added to the sanctions lists:
- Egypt
- Tunisia
- Libya
- Ivory Coast
While the legislation surrounding the sanctions lists makes it a criminal offence to deal with or provide economic resources to those on the sanctions list, inclusion of jurisdictions on the list gives rise to additional anti-money laundering considerations.
MLROs should be alert to retainers which may involve dealing with corrupt payments or enable illegal asset stripping from these jurisdictions.
Further, the unrest within the country may mean that borders are not sufficiently protected and that law enforcement activity for economic crime is not being prioritised.
Organised criminals and terrorists may make use of this situation to seek to transfer funds without detection.
Statement of money laundering controls in overseas jurisdictions
HM Treasury, in cooperation with the Financial Action Taskforce, regularly releases a list of countries where there are increased risks regarding money laundering and terrorist financing. In the most recent statement they advised that:
- Iran and the Democratic People's Republic of Korea (DPRK) have serious deficiencies in their anti-money laundering (AML) and counter-terrorism financing (CTF) regimes.
- The following countries still require improvements in their AML and CTF regimes: Angola, Antigua and Barbuda, Bangladesh, Bolivia, Ecuador, Ethiopia, Ghana, Greece, Honduras, Indonesia, Kenya, Morocco, Myanmar, Nepal, Nigeria, Pakistan, Paraguay, Philippines, Sao Tomé and Principé, Sri Lanka, Sudan, Syria, Tanzania, Thailand, Trinidad and Tobago, Turkey, Turkmenistan, Ukraine, Venezuela, Vietnam and Yemen.
- Argentina has received a mutual evaluation report demonstrating serious deficiencies in their AML and CTF regime.
Read the current list
What should firms do?
The Money Laundering Regulations do not lay down specific requirements for how to conduct enhanced due diligence in generic higher risk categories.
You should take the following steps to meet this obligation:
- be aware of which jurisdictions are on the HM Treasury list and the sanctions list
- be alert to unexpected instructions to undertake transactions relating to one of those jurisdictions where this is outside of your normal practice
- be alert to unexpected increases in instructions to undertake transactions relating to one of those jurisdictions or where the instructions are unusual given your understanding of normal practice in those jurisdictions
- be alert to large asset transfers out of those jurisdictions
- consider undertaking further due diligence checks if you are not sure who you are dealing with and ask more questions about the source of funds and purpose of the transaction
- have a process for checking clients against the sanctions lists where they have a connection with a jurisdiction which is on the sanctions list