On February 13, the European Commission published a list of 23 jurisdictions that it views as posing “significant threats to the financial system of the [European] Union” in the area of anti-money laundering and counter-terrorist financing (“AML/CFT”). On the same day, the U.S. Treasury Department issued a press statement in which it advised that it “does not expect U.S. financial institutions to take the European Commission’s list into account in their AML/CFT policies and procedures.”
The press statement specifically criticized the Commission for going beyond the jurisdictions that the Financial Action Task Force has designated as “high-risk” or “monitored” jurisdictions, and identifying an additional 11 jurisdictions as “high risk.” These additional jurisdictions include Saudi Arabia — a country that generates significant international payments activity — as well as Panama and four U.S. territories (American Samoa, Guam, Puerto Rico, and the U.S. Virgin Islands). These jurisdictions were selected based on what the Commission described as “strategic deficiencies” in their AML/CFT infrastructure, including, for example, perceived inadequacies in the enforcement of AML/CFT laws and in practices related to customer due diligence and the identification of ultimate beneficial owners.
The Treasury Department’s criticism of the Commission’s list is significant in part because the U.S. Financial Crimes Enforcement Network (“FinCEN”), which exercises regulatory and enforcement authority over AML issues, is a bureau of the Treasury Department. At the same time, the Treasury Department’s statement was published as a press statement, not as regulatory guidance, and both FinCEN and other relevant Treasury Department components (including the Office of the Comptroller of the Currency) have strong traditions of independence from the Treasury Department itself. Moreover, it is not clear whether other relevant agencies outside the Treasury Department — such as the Federal Reserve and state regulators — share the Treasury Department’s view.
The influence of the Commission’s list outside the E.U. will depend not only on the reaction of these various U.S. regulators, but also on the reception the list receives in other major financial centers around the world.