High-Risk Third Countries and the treatment of Politically Exposed Persons (PEPs)

Read the latest AML alert on amendments to the Money Laundering Regulations.

Changes to the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (MLR 2017) have been made by the Money Laundering and Terrorist Financing (High-Risk Countries) (Amendment) (No. 2) Regulations 2023 and the Money Laundering and Terrorist Financing (Amendment) Regulations 2023.

All AAT licensed members must consider whether their firm’s existing anti-money laundering (AML) policies and procedures remain sufficient in light of the changes.

Money Laundering and Terrorist Financing Controls in High-Risk Third Countries

The MLR 2017 requires the UK regulated sector to apply enhanced customer due diligence in relation to high-risk third countries.

The list of high-risk third countries (HRTC) was amended on 05 December 2023 by the Money Laundering and Terrorist Financing (High-Risk Countries) (Amendment) (No. 2) Regulations 2023 to align with both the Financial Action Task Force’s (FATF) ‘Jurisdictions under increased monitoring’ and ‘High-risk jurisdictions subject to a call for action’ documents.

Added to the list of HRTC
Bulgaria
Cameroon
Croatia
Nigeria
South Africa
Vietnam

Removed from the list of HRTC
Albania
Cayman Islands
Jordan
Panama

The full list of HRTC can be found in Schedule 3ZA of the MLR 2017.

AAT licensed members are advised to read the HM Treasury Advisory Notice: High Risk Third Countries to ensure they are fulfilling their obligations under the MLR 2017.

Treatment of Politically Exposed Persons under the Money Laundering Regulations

On 10 January 2024, the Money Laundering and Terrorist Financing (Amendment) Regulations 2023 shall amend the MLR 2017 in relation to the treatment of Politically Exposed Persons (PEPs) who are entrusted with prominent public functions by the UK (known as ‘domestic PEPs’).

The amendment makes clear that under the MLR 2017, the starting point for regulated firms in their treatment of domestic PEPs, or a family member or known close associate of a domestic PEP, must be to treat them as inherently lower risk than non-domestic PEPs. Accordingly, regulated firms must apply a lower level of enhanced due diligence to domestic PEPs compared to non-domestic PEPs, unless other enhanced risk factors are present.

AAT licensed members are advised to read the Treatment of Politically Exposed Persons under the Money Laundering Regulations statement made by Baroness Vere of Norbiton on 14 December 2023.

AAT Comment offers news and opinion on the world of business and finance from the Association of Accounting Technicians.