6.4.3 Requirements for High-Risk Countries
Effective from 13/7/2023(AML-CFT Law Article 16.1(e); AML-CFT Decision Article 22, 44.7, 60)
FIs are obliged to implement EDD measures commensurate with the ML/FT risks associated with Business Relationships and transactions with customers from high-risk countries subject to a Call for Action and Jurisdictions under Increased Monitoring and the countries identified by NAMLCFTFC. In the case of legal persons and arrangements, their Beneficial Owners, beneficiaries and other controlling persons from high-risk countries.
FIs can obtain guidance on high risk countries from NAMLCFTFC, from the FATF list of High-Risk Jurisdictions subject to a Call for Action and Jurisdictions under Increased Monitoring, and from NRA report. In addition, reference can also be made to the Organisation for Economic Cooperation and Development (OECD) list of jurisdictions classified as tax havens. The Basel AML index can be a useful source to determine the risk of a country.
Examples of some of the measures FIs should apply in this regard include:
| • | Increased scrutiny and higher standards of verification and documentation from reliable and independent sources with regard to the identity of customers, Beneficial Owners, beneficiaries and other controlling persons; |
| • | More detailed inquiry and evaluation of reasonableness in regard to the purpose of the Business Relationship, the nature of the customer’s business, the customer’s source of funds, and the purpose of individual transactions; |
| • | Increased investigation to ascertain whether the customers or related persons (Beneficial Owners, beneficiaries and other controlling persons, in the case of legal persons and arrangements) are foreign PEPs; |
| • | Increased supervision of the Business Relationship, including the requirement for higher levels of internal reporting and management approval, more frequent monitoring of transactions, and more frequent review/ updating of customer due diligence information. |
Additionally, FIs are obliged to implement all specific CDD measures and countermeasures regarding High Risk Countries as defined by the National Committee for Combating Money Laundering and the Financing of Terrorism and Illegal Organisations, including those related to the implementation of the decisions of the UN Security Council under Chapter VII of the Charter of the United Nations, the International Convention for the Suppression of the Financing of Terrorism and the Treaty on the Non-Proliferation of Nuclear Weapons, and other related directives, and those called for by the Financial Action Task Force (FATF) and/or other FSRBs.
In order to fulfil these obligations, and commensurate with the nature and size of their businesses and the risks involved, FIs should establish adequate internal policies, procedures and controls in relation to the application of EDD measures and risk-proportionate effective countermeasures to customers and Business Relationships associated with high-risk countries. Some of the factors to which FIs should give consideration when formulating such policies, procedures and controls, include but are not limited to the following:
| • | The organisation’s risk appetite with respect to Business Relationships involving high-risk countries; |
| • | Methodologies and procedures for assessing and categorising country risk, and identifying high-risk countries, including the statutorily defined High Risk Countries as established by the NAMLCFTC, and taking into consideration advice or notifications of concerns about weaknesses in the AML/CFT system of other countries issued by the relevant Supervisory Authorities and/or Competent Authorities; |
| • | Determination and implementation of appropriate risk-based controls (for example, certain product or service restrictions, transaction limits, or others) with regard to customers and Business Relationships associated with high-risk countries; |
| • | Organisational roles and responsibilities in relation to the monitoring, management reporting, and risk management of high-risk country Business Relationships; |
| • | Appropriate procedures for the enhanced investigation of Business Relationships involving high-risk countries in relation to their assessment for possible PEP associations; |
| • | Independent audit policies in respect of EDD procedures pertaining to customers/Business Relationships involving high-risk countries and the business units that deal with them. |
For all countries identified as high-risk, the FATF calls on all members and urges all jurisdictions to apply EDD, and in the most serious cases, countries are called upon to apply countermeasures to protect the international financial system from the ongoing money laundering, terrorist financing, and proliferation financing risks emanating from the country. However, specific countermeasures which need to be applied by FIs shall be advised by the corresponding supervisory authorities, the FIU or the NAMLCFTC.