From CompliNEWS | Financial Service Intelligence Watch

The HM Treasury in the UK has recently published an advisory notice concerning high-risk third countries in the context of money laundering. This notice is aimed at providing crucial information to individuals and businesses about the inherent risks involved in executing financial transactions with these countries. The advisory outlines key strategies for identifying and mitigating these risks. Among the recommendations are the implementation of enhanced due diligence procedures and the importance of reporting any activities that are deemed suspicious. This guidance is critical in helping parties involved in international financial transactions to understand and manage the risks associated with money laundering in high-risk jurisdictions.

HM Treasury Advisory Notice on ‘Money Laundering and Terrorist Financing Controls in High-Risk Third Countries’ significantly impacts South Africa, given its inclusion on the high-risk list. This advisory, part of the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (MLRs), emphasises enhanced due diligence for businesses dealing with entities in high-risk third countries (HRTCs).

According to the updated regulations, coming into force on 22 January 2024, the definition of an HRTC will directly refer to lists published by the Financial Action Task Force (FATF). These lists include ‘High-Risk Jurisdictions subject to a Call for Action’ and ‘Jurisdictions under Increased Monitoring’. South African businesses must now be acutely aware of these changes as they navigate international financial relationships.

The inclusion of South Africa on the high-risk list means that UK-regulated businesses must apply enhanced customer due diligence and ongoing monitoring in any dealings with South African entities. This is not just limited to new business relationships but also extends to existing ones. The level of due diligence will vary based on the risk level associated with each customer or transaction.

Furthermore, UK businesses with branches or subsidiaries in HRTCs, like South Africa, are required to ensure these entities implement measures equivalent to UK standards. This might involve reviewing and adjusting current procedures to meet these enhanced requirements.

The FATF’s identification of South Africa as a high-risk country is significant. It highlights the need for rigorous anti-money laundering (AML) and counter-terrorist financing (CTF) controls in South African financial transactions. This situation calls for a proactive approach from South African entities to understand and mitigate the potential risks associated with their financial operations.

For detailed guidance and to keep updated on these regulations, South African businesses and relevant entities should refer to official publications from HM Treasury and FATF. This is crucial for maintaining compliance and ensuring smooth financial transactions with UK-regulated sectors.

For more comprehensive information and to understand the full scope of these regulations, it’s recommended to refer to the official HM Treasury advisory notice and the FATF website.

Money Laundering and Terrorist Financing (High-Risk Countries) (Amendment) Regulations 2024