When MLROs are populating their lists of high- and low-risk jurisdictions, they are advised to consult as wide a range of (reputable) sources as possible. (For non-MLRO readers, the risk status of a jurisdiction matters because if it is judged to have a good approach to AML – sometimes called “equivalence” – then business coming through that jurisdiction might not need high levels of due diligence. On the other hand, if a jurisdiction has been pinpointed as having deficiencies in its AML regime, then business connected with it will almost certainly trigger enhanced due diligence requirements. That’s an over-simplification, but you get the idea.) And one of the go-to sources is the list of EU Member States.
Looking for example at Part III of the JMLSG guidance issued for the UK financial sector, we read that in section 2.2 that “Member States of the EU/EEA benefit de jure from mutual recognition through the implementation of the money laundering directive” – and are therefore considered to be equivalent jurisdictions when it comes to AML efforts. But the wise MLRO reads further, where the JMLSG elaborates: “Although firms may initially presume equivalence, significant variations may exist in the precise measures (and in the timing of their introduction) that have been taken to transpose the money laundering directive (and its predecessors) into national laws and regulations. Moreover, the standards of compliance monitoring in respect of credit and financial institutions will also vary.”
I should coco. The reason that this topic is on my mind at all is that I recently went on a rail holiday to eastern Europe. One of the countries I visited was Romania – a member of the EU since January 2007 – and while I was there I got chatting to a local girl in her twenties who (and this was the common ground we found) had worked for several years as a beauty therapist in a spa in Jersey and was keen to keep her English language skills honed. I asked her what it was like returning to Romania after her Jersey sojourn, and she said it was good to get back to the mountains and the familiar food, but she was in despair at the levels of corruption. “Some of the older politicians are in jail now, but by no means all of the corrupt ones. The new regime is trying, and the public does care about it – we realise that it’s important to get this right. But until we get rid of the old order, we’re stuck. Here in Romania you can still get wrong things done if you know the right people.” So although Romania is – technically – an equivalent jurisdiction, it seems that using the EU shortcut would be foolish, as it seems that corruption is still endemic at the highest levels, which will surely have an impact on the implementation, checking and enforcement of the AML regime in the Romanian regulated sector. And yes, I’ll try to plan future holidays so that I can check up on others for you.