The Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (the MLRs) require the UK regulated sector to apply enhanced due diligence and enhanced ongoing monitoring in relation to high-risk third countries (HRTCs).

This means that the UK government is required to identify countries that have weak systems for anti-money laundering and stopping terrorist financing, and assess whether these countries should be classified as a HRTC.  This list of countries was updated on Friday, 28 June 2024.

In summary, Monaco and Venezuela were added to the list of jurisdictions under increased monitoring, and Turkey and Jamaica were removed from it.
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‍What does this mean in practice?

Law firms must carry out enhanced due diligence and ongoing monitoring on all clients, both new and existing, if they are established in a HRTC, meaning they live, work, or do business in that jurisdiction.

This makes it essential for firms to stay updated with the HRTC list, and have a process in place for checking both new and existing clients when HRTC list changes occur.  Even if a client was not classified as high risk when initially onboarded, that classification will change if they live in or do business in a country which subsequently becomes a HRTC.
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‍Who decides which countries should be classified as HRTCs?

Following the UK’s departure from the EU, the UK's HRTC list was eventually aligned with the Financial Action Task Force (FATF)'s:

• "black list" of jurisdictions subject to a Call for Action; and
• "grey list" of jurisdictions under increased monitoring.

Earlier this year, due to challenges in keeping pace with FATF updates requiring new legislation for each change to their list, the government amended the definition of a high-risk third country.

This means any changes to the FATF’s list = an immediate change to the UK’s HRTC list.
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‍Who is the Financial Action Task Force?

The FATF studies how money gets laundered and how terrorism gets funded, pushes for global rules to lower these risks, and checks if countries are doing enough to tackle them. It then identifies jurisdictions with weak measures to combat money laundering and terrorist financing.

The FATF has a set standard that each country should meet to show they know and understand the money laundering and terrorist financing risks they are exposed to. This standard is known as the FATF Recommendations.  The FATF Recommendations aim to help countries work together to fight organised crime, corruption, and terrorism globally and assist authorities in tracing the money of criminals involved in illegal drugs, human trafficking, and other crimes. You’ll notice on their socials they often use the hashtag ‘FollowTheMoney’.

Three times a year, in February, June, and October, the FATF holds its “plenary” at which time representatives from member countries:

• discuss and decide on rules to fight money laundering, terrorist financing, and other financial crimes;
• identify which countries are following those rules; and
• decide whether to add or remove countries from the 'grey' and 'black' lists.
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‍Jurisdictions under Increased Monitoring Jurisdiction (the grey list)

I often compare the grey list to the “naughty step” because countries can get off the grey list if they do what the FATF asks.

Countries end up on the grey list because their Anti Money Laundering and Counter Terrorist Financing (AML/CTF) programs have some gaps, however, they've agreed to work closely with the FATF to fix these problems quickly. The FATF keeps a close tab on their progress to help them get off the grey list.
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‍High Risk Jurisdiction subject to a call for action (the black list)

High-risk jurisdictions have major weaknesses in preventing money laundering, terrorist financing, and proliferation financing, and FATF has concluded that they have shown no interest in fixing these issues. Until they show commitment to improving their systems, these countries remain on the black list.

The FATF urges all its members and jurisdictions to implement enhanced due diligence for these countries.
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‍Latest FATF Plenary updates

After the latest FATF plenary, there have been some changes to the Jurisdictions under Increased Monitoring Jurisdiction (the grey list): Turkey and Jamaica were removed from the grey list and Monaco and Venezuela were added to it.

The High Risk Jurisdictions subject to a call for action (the black list) remains the same with Democratic People's Republic of Korea (DPRK), Iran and Myanmar listed.

Updated UK list of High Risk Third Countries - June 2024

‍How does Legl help?

When you add a contact to Legl, we’ll check if the address supplied is listed on the HRTC list. You can also audit which clients have addresses in an HRTC using our MLRO Oversight dashboard at any time.

We automatically track updates to the HRTC list, so you don’t have to!