Saudi Business Is About to Get More Complicated for EU Banks

(Bloomberg) -- European Union banks will face higher hurdles in dealing with clients from countries including Saudi Arabia as the bloc moves to tighten controls on illicit financial flows.

Panama and the U.S. Virgin Islands will also be put alongside Iran and North Korea on a new EU roll call of 23 countries outside the bloc identified as posing higher risks for terrorist financing and money laundering, according to people familiar with its content. The European Commission, which drew up the list, will sign off on it on Wednesday, according to people familiar with its content who spoke on condition of anonymity.

EU banks dealing with customers from those countries will have to apply additional checks, also known as “enhanced customer due diligence.” That can mean that they have to gather more background information about individuals and verify that the conducted business is legitimate.

The move, to be announced by EU Justice Commissioner Vera Jourova, follows a string of money-laundering cases involving some of the bloc’s biggest banks, highlighting shortcomings in the EU’s framework. Danske Bank A/S is at the heart of a dirty money scandal involving suspicious funds that flowed from Russia and elsewhere through its Estonian unit.

It’s the first time the commission is drawing up a list based on its own methodology, targeting more countries than an existing version that largely builds on analysis by the Financial Action Task Force, a global watchdog. A country is added if “strategic deficiencies” in its anti-money laundering framework are identified, for example in relation to record keeping and the reporting of suspicious transactions.

The addition of Saudi Arabia also reflects concerns in Brussels that the kingdom poses a higher risk in relation to the financing of terrorist entities, according to an internal commission document that was seen by Bloomberg. The list will be subject to continuous monitoring and revisions, meaning that countries can be taken on or off, depending on their regulatory safeguards against illicit activities.

To contact the reporters on this story: Alexander Weber in Brussels at aweber45@bloomberg.net;Stephanie Bodoni in Luxembourg at sbodoni@bloomberg.net

To contact the editors responsible for this story: Dale Crofts at dcrofts@bloomberg.net, Nikos Chrysoloras, Peter Chapman

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