AMLD and high risk countries
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The Anti Money Laundering Directive is a far-reaching law that has been in force in the Netherlands since 2008. This law has a major impact on how transactions in tax or real estate may be executed. An important part of the law is that assessment must be made of the risk of money laundering and financing of terrorism for all parties involved in the transaction. Also important in this assessment is the geographical origin of a party, the so-called country risk. In this blog, we will have a brief look at what this entails and how the country risk is determined.
Money Laundering and Terrorist Financing (Prevention) Act
The AMLD was drawn up to prevent money laundering and terrorist financing. The AMLD has been in force since 1 August 2008 in the Netherlands and was amended on 25 July 2018 according to the fourth European anti-money laundering directive (AMDL4). The core of the AMLD is the involvement of parties that are closely involved in transactions of fiscal resources, such as banks and notaries, to detect money laundering or the financing of terrorism. This is done by so-called customer due diligence, where these parties investigate their customers and the risk of money laundering or terrorist financing they carry.
A country is a so-called risk country if it is on a sanctions list, if it is on the FATF (Financial Action Task Force) list of risk countries, and if it is considered a risk country by the European Commission. All these bodies use different criteria to compile their respective lists, making it difficult for individuals to keep up to date and comply with the law.
There are different commissions who decide if a country is considered a risk country and should be put on a list. Both the FATF and the European Commission have their own lists with risk countries
Why a country is on the list of risk countries
The various committees that make decisions about risk countries each look at different aspects when drawing up lists of countries. When a country is included on a sanctions list, it almost always arises from geopolitical decisions, such as the ongoing sanctions against North Korea. The FATF, on the other hand, draws up its lists by looking at current anti-money laundering or terrorist financing (AML/CFT) measures in place in countries. Countries whose measures are considered inadequate will be placed on the FATF risk lists. The European Commission initially followed the FATF’s assessment but recently decided to adopt an amended standard.
The best way to deal with persons that are living in a risk country or persons that have a company based in a risk country, is to conduct an extensive client research
Dealing with country risk
Om correct om te gaan met het landenrisico vereist dat u altijd op de hoogte bent van de huidige risicolijsten en dat het cliëntenonderzoek goed uitgevoerd wordt. Het landenrisico is ook nauw betrokken met de sanctiewet, waardoor een particulier risico loopt om een economisch delict aan te gaan als het onderzoek ontoereikend is. De beste manier om met dit risico om te gaan is dan ook door te verzekeren dat het beleid tegenover cliëntenonderzoek toereikend is.
Adequate customer due diligence
The customer due diligence remains the first step required to identify a customer or business relation from a risk country. A customer due diligence should consider the identity and identification documents of a customer, identify the ultimate interested party (UBO) behind a customer, and ultimately estimate the risk of money laundering and terrorist financing based on this information.
For both the customer and the identified UBO, this process needs to include a focus on the geographical region where they are based. This should then be compared with the current sanctions lists, the list of FAFT risk countries, and the list of high-risk countries of the European Commission.
Country risk in the CDD On Demand solution
CDD On Demand also checks whether a person's nationality poses an increased risk (appears on the FATF list). Furthermore, if known, the address of the person is also checked for country risk. When this involves an increased risk, it is displayed as a warning on the report.
CCD On Demand
SCOPE FinTech Solutions has developed the CCD On Demand solution to support users in conducting a customer due diligence in accordance with the AMLD. The CCD On Demand solution is a user-friendly external customer due diligence tool that can be easily integrated with an existing customer base.