The EU Dirty Money Blacklist: Justice or Political Retaliation?

By Scott Morgan

The European Commission has updated its “dirty money” blacklist in recent days. This is a list of countries and territories that pose risks regarding terrorist financing and money laundering. Over the last few years there have been several high profile incidents involving European Banks getting caught laundering money for certain illegal activities. They were compelled to compile this list as a form of due diligence.

There are some new additions and removals to the list that are certain to create attention - some positive but some of it is negative. For example:

The addition of Nigeria to this list days before it heads to the polls for Presidential Elections will be seen as an attempt to influence the polls by portraying the incumbent President Buhari in a negative light.

Another interesting addition has to be the Kingdom of Saudi Arabia. For decades analysts who track the financing of terrorist groups have been demanding that the Kingdom be held accountable for prior acts up to and including funding Al-Qaeda. After what was considered to be an acrimonious debate, within the Commission, the country was added. 

Four years after the release of the Panama Papers which documented the activities of the Mossack Fonseca law firm, as it assisted several actors in hiding money in Panama, that country has been added to the list as well. Even though the law firm was forced out of business the action by the Commission suggests that there are other actors within the country that are still active in this illicit activity. 

The countries that were removed from the list include Laos, Uganda, Bosnia, Vanuatu and Guyana.

Other notable additions include Botswana, Ghana, Samoa, the Bahamas, Libya and four U.S. Territories. This is not a typo. The Territories are the U.S. Virgin Islands, Guam, American Samoa and Puerto Rico. Two of the US Territories - the Virgin Islands and Puerto Rico - suffered substantial damage to infrastructure after Hurricanes in 2017. There is some merit to these concerns but this will be a surprise in Washington.

Three of the U.S. Territories - Guam, the Virgin Islands and American Samoa - are on a separate EU Blacklist of Tax Havens. 

It does make one wonder what they think of Delaware, Nevada, Florida and North Dakota which are the four U.S. States which have the most relaxed processes to incorporate new businesses.

There is now a mechanism that has been triggered. This list has to be endorsed by the 28 members states within the next 30 days for these moves be accepted. It is possible for this list to be extended by an additional 30 days also. It will take a majority vote among the members to formally accept these recommendations.

This list will also impact Brexit. There is concern that the current findings could create confusion among some businesses due to the fact the United Kingdom compiles its own list under the auspices of the Financial Action Task Force (FATF). When it comes to Anti-Money Laundering efforts the UK list is considered to be the the Gold Standard.

Oh what a tangled web is being weaved in Brussels…..

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Updated List:

(1)            Afghanistan,

(2)            American Samoa,

(3)            The Bahamas,

(4)            Botswana,

(5)            Democratic People's Republic of Korea,

(6)            Ethiopia,

(7)            Ghana,

(8)            Guam,

(9)            Iran,

(10)          Iraq,

(11)          Libya,

(12)          Nigeria,

(13)          Pakistan,

(14)          Panama,

(15)          Puerto Rico,

(16)          Samoa,

(17)          Saudi Arabia,

(18)          Sri Lanka,

(19)          Syria,

(20)          Trinidad and Tobago,

(21)          Tunisia,

(22)          US Virgin Islands,

(23)          Yemen.

(Source: European Commission)

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