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US Treasury Department Criticizes EU's List of High-Risk Countries

Rear view of the Treasury Department building in Washington, D.C. Photo courtesy of Wikimedia.
Rear view of the Treasury Department building in Washington, D.C. Photo courtesy of Wikimedia.

Rear view of the Treasury Department building in Washington, D.C. Photo courtesy of Wikimedia.

The European Commission has released a new list of jurisdictions that pose a high risk because they don’t do enough to prevent money laundering and terrorism financing—and the U.S. Treasury Department is displeased.

The Treasury Department rejected the list on Wednesday, the same day the list was published, and advised stateside financial institutions to do the same.

The list of 23 countries includes the U.S. territories of American Samoa, Guam, Puerto Rico and the U.S. Virgin Islands. Afghanistan, Iran, Iraq, Syria and Yemen also appear on the list. As does the Bahamas.

“The U.S. Department of the Treasury has significant concerns about the substance of the list and the flawed process by which it was developed,” the agency stated. It added that it “does not expect U.S. financial institutions to take the European Commission’s list into account in their … policies and procedures.”

“They threw so much shade on the European Commission,” said Judith Alison Lee, a partner and international trade lawyer at Gibson, Dunn & Crutcher in Washington, D.C., where she co-chairs the firm’s international trade group.

Lee added that the Trump administration has “been insulting the European Commission as much as they can.” She noted that the administration also downgraded the diplomatic status of the European Union’s delegation to the U.S. from a member state to an international organization, without telling the EU.

Meanwhile, Miami customs and international trade lawyer Peter Quinter of GrayRobinson wrote in an email that the Treasury Department’s statement “is typical of Trump’s hostility to positive international relations with the European Union and other traditional allies of the United States.”

The European Commission stated Wednesday that it created the list to help “protect the EU financial system by better preventing money laundering and terrorist financing risks.” The commission has not yet responded to the Treasury Department’s statement.

European banks and other entities that are required to follow EU anti-money laundering rules are required to apply heightened due diligence when dealing with financial institutions on the commission’s high-risk list.

The commission stated that it established its latest list through “in-depth analysis” and a new, stricter methodology under an anti-money laundering directive that took effect in July.

But the Treasury Department contended that the commission’s process for developing the list was inadequate and “contrasts starkly” with the methodology that the Financial Action Task Force follows. The FATF is a global policymaking body that sets standards for combating money laundering and terrorism financing, among other things.

The Treasury Department also asserted that the commission notified the affected countries “only days” before releasing the list, depriving those jurisdictions of having a meaningful opportunity to challenge their inclusion.

As for U.S. financial institutions that are considering the Treasury Department’s statement, Lee expected that “they would take the notice under advisement along with all the other information they gather from their compliance programs.”

“A lot of these institutions have offices and branches in the EU. What are they supposed to do?” she added. “Financial institutions are not going to ignore the European Commission.”

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