EU blacklist based on 'unclear criteria, obvious omissions'

The European Commission's money-laundering blacklist has dubious criteria and obvious omissions, and is not gaining much traction with banks in the US and Latin America and the Caribbean (LAC), according to David Schwartz, president and CEO of the Florida International Banking Association (FIBA).

Released February 13, the list includes countries with weak anti-money laundering and terrorist financing regimes and included the Bahamas, the US Virgin Islands, Puerto Rico, Panama, and Trinidad and Tobago.

"I don't know what criteria was used for this EU blacklist to name the countries that they did, because there were obviously some glaring absences from that list," said Schwartz in an interview with BNamericas following a recent FIBA anti-money laundering (AML) conference.

The list drew strong objections from the LAC nations that were included.

"There have been some issues regarding money laundering programs [in the EU], and you don't have to look farther than the Baltic states or, now, Scandinavia, yet, not one of those countries is named on that list," said Schwartz. "So there seems to be some issue with exactly how this list was developed and what criteria they used.

"We even saw the EU itself kind of push back on the commission that developed the list," added Schwartz, referring to last Friday's move by EU member states to unanimously reject further additions to the list.

The European Commission has promised to submit a revised list in the coming months that is more in line with the opinions of the member states. However, the question remains as to whether banks will give credence to the list.

"In my discussions with banks around the region and here in the US, as of now, nobody was paying too much attention to that list, as opposed to how well they would pay attention if it were FATF."

Founded in 1989 as a G7 initiative, the Financial Action Task Force (FATF) is an intergovernmental body built around 40 explicit anti-money laundering and counter terrorist financing standards.

"The FAFT list has a definite impact," said Schwartz. "If you go on that gray list, what immediately happens you'll see a directive issued from [US Financial Crimes Enforcement] FINCEN that says 'These countries have been added to the list. You are now required to perform enhanced due diligence when working with banks in that country'. So, that has an impact when it comes to bank-risk appetite."