HM Treasury Alert: Tightened AML Measures for High-Risk Countries – Key Updates

HM Treasury Advisory Notice: Controls for Money Laundering and Terrorist Financing in High-Risk Third Countries

The Money Laundering, Terrorist Financing, and Transfer of Funds Regulations 2017 (MLRs) mandate enhanced customer due diligence for the UK regulated sector concerning high-risk third countries.

Regulation 33(1)(b) of the MLRs necessitates regulated businesses to implement enhanced customer due diligence and ongoing monitoring in business relationships or relevant transactions involving persons from high-risk third countries, as specified in Schedule 3ZA.

The Money Laundering and Terrorist Financing (High-Risk Countries) (Amendment) (No.2) Regulations 2023, effective from December 5, 2023, will update Schedule 3ZA to align with FATF lists, adding Bulgaria, Cameroon, Croatia, Nigeria, South Africa, and Vietnam, while removing Albania, Cayman Islands, Jordan, and Panama.

Enhanced due diligence (EDD) is required for customers established in high-risk third countries, with the level of scrutiny proportional to the risk. Firms should refer to sector-specific guidance approved by HM Treasury for compliance.

Regulation 20(3) emphasizes equivalent measures in third-country branches and subsidiaries, aligning with the enhanced due diligence in the UK.

FATF’s October 27, 2023 statements identify jurisdictions with strategic deficiencies, advising firms to consider the listed countries for Schedule 3ZA.

Annex A lists jurisdictions for inclusion in Schedule 3ZA, while Annex B identifies jurisdictions under increased monitoring, emphasizing a risk-based approach.

This advisory notice replaces previous notices and underscores the UK’s commitment to combat financial crime through international cooperation, particularly with the FATF.

For detailed information and updates, refer to HM Treasury’s website on anti-money laundering and counter-financing of terrorism.