High-Risk Third Countries and Enhanced Due Diligence – Reg 33 MLR17

IPA Insolvency Practitioner newsletter AML Digest, May 2024

Reg 33 of the MLR17 (as amended) relates to when Enhanced Due Diligence (‘EDD’) must be applied. The need for EDD is not only in relation to any high-risk cases identified in your firm-wide risk assessment under Reg 18 MLR17 but also in relation to any business relationship with a person established in a high-risk third country or in relation to any relevant transaction where either of the parties to the transaction is established in a high-risk third country (Reg 33(1)(b)).

Reg 33(3) provides further details on when EDD for high-risk third countries is required and advises that:

A high-risk third country is a country named on either the high-risk jurisdictions subject to a Call for Action or a jurisdiction under Increased Monitoring published by FATF – Reg33(3)(a)

A transaction is advised as a transaction in relation to which customer due diligence in required to be applied (Reg 33(3)(b)) and being established as:

• For an individual – being resident in that country – but not merely being born in that country
• For a legal person – being incorporated in or having its principal place of business in that country, or having its principal regulatory authority in that country for a financial or credit institution (Reg 33(3)(c))

The main change in Reg 33 is that the Regulation no longer refers to the Schedule of High-Risk Countries which was previously found at Sch3ZA MLR17. HM Treasury amended the definition and removed Sch3ZA from 24 January 2024.

You must now regularly review the list of High-Risk and monitored jurisdictions from FATF. The list is reviewed as part of plenary meetings of FATF held three times a year in Feb, July & Oct.

Helpful links for members are:

• High-Risk and other monitored jurisdictions – view here
• FATF events calendar with details of plenary sessions – view here
• Advisory Notice on High-Risk Third Countries from HM Treasury of 26 Feb 24 – view here