I work regularly in seven jurisdictions, all of which have AML legislation based on the UK (well, I suppose the EU) model. An accepted part of this model is the notion of equivalence, i.e. there are certain jurisdictions whose AML requirements you can consider to be of the same standard as those of your own jurisdiction for the purposes of due diligence. This provision is garlanded with warnings – you must apply your own risk-based judgement to these jurisdictions, it’s not a “get out of jail free” card, etc. – but MLROs generally view equivalence as a blessed relief from the rigours of due diligence.
The problems come when you look beyond the general concept to the specific jurisdictions on the lists. In order not to cause political ructions, EU member states tend to consider all of their fellow EU member states as equivalent. But with the best will in the world (and accepting that this may put the kibosh on any ambitions I may have to deliver lots of lovely training in the Mediterranean sunshine), do we really believe that the AML requirements in Italy are as stringent as those in Sweden – in either detail or application? And that’s before we get into using FATF membership as the key to equivalence, thus welcoming Russia and Hong Kong into our good guys list.
I appreciate that MLROs are grateful for all the help they can get, and that convincing their sales force that although Italy is an EU member state and a member of the FATF we perhaps can’t rely on their due diligence is maybe a battle too far. But if we come back to the basics of equivalence, it’s just not working – and by calling jurisdictions equivalent when they are plainly not, we are devaluing the whole exercise.
I hate money laundering 