The European Union (EU) has issued a caution to authorities and trade organisations regarding financial transactions with high-risk states, urging businesses and individuals to implement enhanced due diligence measures.

This warning follows the update of the “Regulation on High-risk Third Countries” by the European Commission (EC) in December 2022, which identifies countries that are deemed to have strategic weaknesses in combating money laundering and terrorist financing (CFT). Notably, gambling, banking, and insurance are all considered high-risk industries, and enterprises operating within these sectors must exercise greater vigilance when engaging in “relationships and transactions involving high-risk third countries.”

The nations of Afghanistan, Barbados, Burkina Faso, Cambodia, Cayman Islands, Democratic Republic of Congo, Gibraltar, Haiti, Iran, Jamaica, Jordan, Mali, Morocco, Mozambique, Myanmar, Democratic People’s Republic of Korea, Panama, Philippines, Senegal, South Sudan, Syria, Tanzania, Trinidad and Tobago, Uganda, Vanuatu, United Arab Emirates, and Yemen have been identified as possessing strategic deficiencies in their AML/CFT regimes. Notably, Gibraltar was included in the roster of high-risk nations by the EC during its latest appraisal of AML/CFT inadequacies in March 2023.

Moreover, Gibraltar was incorporated into the “greylist” of the Financial Action Task Force (FATF) in 2022, signifying the need for more stringent monitoring of financial operations within its borders. The FATF functions as the financial monitoring organisation of the G7.

Gibraltar functions as an administrative hub for the online gambling industry, which, as of May 2022, is estimated to encompass 45 licenses and a workforce of approximately 2,000 employees.

The assessments conducted by the Financial Action Task Force (FATF) are widely regarded as a standard for the monitoring list of the European Commission (EC) when assessing countries to be considered as high-risk. Nevertheless, the EC reiterates its commitment to conducting an independent appraisal of countries across eight critical areas to address financial crimes.

Regulators and trade organizations across all member states have cautioned firms and individuals to exercise caution in preventing money laundering and other criminal activities arising from high-risk third countries.

As part of its efforts to protect the integrity and stability of the financial system, the EU has proposed to revise its legislation on high-risk third nations, aligning with its commitment to combat money laundering and the financing of terrorism.