Dynamic uncertainty

Timon Molloy, Editor

Equivalence – its precise meaning on the ground – is set to become a standing agenda item in all AML meetings. That perhaps is as it should be: not only will jurisdictions slide up and down the risk scale as their governments (and so political will regarding AML/CFT) change but the question of which criteria and weightings to use in the country risk assessment will remain open. At least, it will in states that adopt a purposive approach. In the UK, for example, firms are left to build their own country risk models and not treat the EC list as definitive; when, on 12 May 2008, HM Treasury published which third countries had made the EU Third Money Laundering Directive regime grade, probably anticipating snorts of derision from MLROs at the inclusion of the Russian Federation (though to be fair, the US, too, is in breach of core aspects of the FATF Recommendations), it said, “Firms should note that the list does not override the need for them to continue to operate risk-based procedures when dealing with customers based in an equivalent jurisdiction. ”The Joint Money Laundering Steering Group (JMLSG) reinforced the need for caution in its note of 8 August 2008, which states early on that derogation from the need to apply standard customer due diligence (CDD) in respect of foreign credit or financial institutions subject to Third Directive or equivalent requirements is “focused on the provisions of the legislation in a particular jurisdiction, rather than what actually happens in practice.” Or, to adapt George Orwell’s dictum, “All jurisdictions on the EC list are equivalent but some are more equivalent than others.”