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.

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Photo of Nikhil Gore Nikhil Gore

A member of the international arbitration and financial institutions practices, Nikhil V. Gore represents sovereign states and U.S. and global firms in international treaty-based and commercial disputes. He also regularly represents U.S. financial institutions, and the U.S. branches and affiliates of foreign financial…

A member of the international arbitration and financial institutions practices, Nikhil V. Gore represents sovereign states and U.S. and global firms in international treaty-based and commercial disputes. He also regularly represents U.S. financial institutions, and the U.S. branches and affiliates of foreign financial institutions, in investigations and inquiries involving the Federal Reserve, OCC, FDIC, CFPB, and state banking regulators.

Mr. Gore has served as counsel in investment and commercial arbitrations spanning several industries and a variety of regions, including Asia, Eastern Europe, North America, and Southern Africa. Additionally, he has expertise in the law of the sea, and was part of the Covington team that secured an order from the International Tribunal for the Law of the Sea, which required Russia to release three Ukrainian naval vessels and twenty-four servicemen detained in the Black Sea in 2018.

In his financial institutions practice, Mr. Gore has experience with enforcement actions and investigations relating to the Bank Secrecy Act, the federal criminal money laundering statutes, the full range of safety and soundness issues (including, in particular, supervisory reviews of bank control functions), and fair lending and consumer compliance. Mr. Gore is a regular contributor to the firm’s financial services blog.