EU Blacklists Saudi Arabia in Fight Against Money-Laundering and Terror Financing

(Bloomberg) -- Saudi Arabia, Panama and the U.S. Virgin Islands were included on a blacklist by European Union regulators seeking to stem the risks of money-laundering and terrorist financing.

The European Commission on Wednesday identified 23 countries as posing a higher risk for illicit financial flows, adding regulatory hurdles for European banks dealing with clients from countries in these nations.

“We have established the strongest anti-money laundering standards in the world, but we have to make sure that dirty money from other countries does not find its way to our financial system,” EU Justice Commissioner Vera Jourova said in a statement. “Dirty money is the lifeblood of organized crime and terrorism.”

The EU move follows a string of money-laundering cases involving some of the bloc’s biggest banks, highlighting shortcomings in the EU’s framework. Danske Bank A/S is at the heart of a dirty money scandal involving suspicious funds that flowed from Russia and elsewhere through its Estonian unit. Russia isn’t included on the list.

‘Weaknesses’

“This is an invitation to address your weaknesses,” Jourova said at a press briefing in Strasbourg, France, adding that the list is not set in stone and will be adapted as countries included address the EU regulator’s concerns. “My aim is not to list countries for the sake of listing them.”

As a result of the list, “banks and other entities covered by EU anti-money laundering rules will be required to apply increased checks (due diligence) on financial operations involving customers and financial institutions from these high-risk third countries to better identify any suspicious money flows,” the commission said.

It’s the first time the commission has drawn up a list based on its own methodology, targeting more countries than an existing version that largely builds on analysis by the Financial Action Task Force, a global watchdog. A country is added if “strategic deficiencies” in its anti-money laundering framework are identified, for example in relation to record keeping and the reporting of suspicious transactions.

‘Deepest Concern’

Panama “expresses its deepest concern regarding a potential inclusion” on the EU list, the nation’s ambassador to the EU, Miguel Verzbolovskis, said in a statement, describing the move as “unfair punishment” for progress made.

“The timely adoption of our national law by democratic means is concrete proof of our will to cooperate and adhere to international standards and to directly address criticism,” he said.

The addition of Saudi Arabia also reflects concerns in Brussels that the kingdom poses a higher risk in relation to the financing of terrorist entities, according to an internal commission document that was seen by Bloomberg. The list will be subject to continuous monitoring and revisions, meaning that countries can be taken on or off, depending on their regulatory safeguards against illicit activities.

The Saudi government’s Center for International Communication didn’t immediately respond to a request for comment.

Inclusion on the list “does not entail any type of sanctions, restrictions on trade relations or impediment to development aid; but requires banks and obliged entities to apply enhanced vigilance measures on transactions involving these countries,” the EU regulator said in a statement.

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