An EU blacklist of jurisdictions deemed not to be co-operating on anti-money laundering has prompted a sharp response from the US.

(An earlier version of this news item was published on Compliance Matters, a sister news service to this one.)

The European Union has issued a fresh list of 23 non-EU countries accused of being strategically deficient in the fight against money laundering and terrorist finance. The move has been attacked by the US government.

The 23 jurisdictions are Afghanistan; American Samoa; the Bahamas; Botswana; Ethiopia; Ghana; Guam; Iran; Iraq; Libya; Nigeria; North Korea; Pakistan; Panama; Puerto Rico; Samoa; Saudi Arabia; Sri Lanka; Syria; Trinidad and Tobago; Tunisia; US Virgin Islands; and Yemen. This will replace a list that already contains 16 countries in the space of 20 days after the publication of the relevant "delegated regulation" in the EU's Official Journal.

As a result of the listing, banks and other financial firms covered by the bloc's AML rules will be required to apply "enhanced due diligence" to financial operations involving customers and financial institutions from these countries, the better to identify any suspicious money flows. This is apparently a result of the stricter demands of the governmental club's fifth anti-money laundering directive, which came into force in July. 

The EU’s list has drawn fire from the US Treasury Department because of the inclusion of four US territories, including Puerto Rico, American Samoa, Guam, and the United States Virgin Islands. “The US Department of the Treasury has significant concerns about the substance of the list and the flawed process by which it was developed,” the department said in a statement. The Treasury continued that US banks should brush off suggestions from the EU that they should put transactions under more scrutiny because of the list.

The AML directives allow the European Commission, the nearest thing that the EU has to an executive branch, to issue blacklists that EU financial firms have to observe.

Věra Jourová, the EU's commissioner for justice, consumers and gender equality, is convinced that the AML laws are "the strongest anti-money laundering standards in the world," although the UK has always been ahead of its continental masters in this regard.

The 23 countries were plucked from a larger list of 54, which was made public in November. All the countries on that larger list, according to the EU, have "systemic impact on the integrity of the EU financial system”; the International Monetary Fund calls them "international offshore financial centres," and they are "economically relevant" to, and have strong economic ties with, the EU. 

Some of the countries listed in the latest collection are already on the current EU list, which includes 16 countries. The commission also proposes to remove a number of countries from its list; these are Bosnia-Herzegovina, Guyana, Laos, Uganda and Vanuatu.

Politically-charged AML blacklists were discredited very early in the century when the Paris-based Financial Action Task Force, the world's AML standard-setter, abandoned its controversial list of "non-co-operative countries and territories" in the face of international opprobrium. This did not stop it from reviving the list in another form a few years later. 

The EU has drawn fire for promoting suspect lists as well, notably the AML whitelist that it asked its member-states to promulgate on its behalf in 2008 which gave financial firms from Aruba, Curaçao and Russia a privileged pass as states with “equivalent” AML controls.