EU puts Myanmar on money-laundering blacklist
The European Commission has added Myanmar to its list of states that pose high risks to the bloc’s financial system today (May 7) because of anti-money laundering and terrorism financing deficiencies.
Cambodia, Barbados, Botswana, Ghana, Jamaica, Mongolia, Nicaragua and Zimbabwe are also included in the latest EU listing. Laos, Bosnia-Herzegovina, Ethiopia, Guyana, Sri Lanka and Tunisia are removed from the list.
There was no immediate statement by the Myanmar government in response to the blacklisting.
Banks and financial and tax firms are obliged under EU law to subject their clients who have dealings with countries on the list to a higher degree of due diligence and scrutiny.
“Given the level of EU scrutiny on Myanmar already in place, with sanctions on military personnel and potentially more to come if peace talks are not resumed, this move by Brussels will increase operational, financial and reputational risks for financial services firms established in Myanmar,” commented Jens Presthus, senior associate at London-based advisory firm Global Counsel.
The move will increase the already significant market risks for international banks who are interested in Myanmar. No European-headquartered banks are among the 20 foreign banks given licences to do business in the previously isolated market, although UK-based Standard Chartered has a representative office in Yangon.
“The blacklisting will add to the international pressure on Daw Aung San Suu Kyi’s government to clean up Myanmar’s economy and financial system. But some of key challenges such as illicit trade and gambling are closely associated with border areas and are beyond the control of the civilian government,” said financial analyst Ko Aung Thaw Zin.
The Commission is mandated to adopt a list of high-risk third countries presenting strategic deficiencies in their regulations to counter money laundering and terror financing, according to the EU Delegation’s spokesperson in Myanmar.
It is necessary to update the list and align it with assessments by the Paris-based Financial Action Task Force (FATF), the spokesperson added.
These changes will be submitted to the European Parliament and Council for approval within two months. Myanmar and other newly listed states will be subject to the regulations from October 1 onwards because of the COVID-19 crisis.
The EU listing follows the decision by FATF earlier this year to place Myanmar on a list of states perceived as prone to money laundering and terror financing. FATF in February said Myanmar needs to strengthen its understanding of “money-laundering risks in key areas” and improve its governance of banks and financial entities.
The watchdog’s 2018 report identified tax evasion, illicit jade trade, environmental crimes and corruption as the primary money laundering offences committed in the country. It also named casinos, the banking and gemstone sectors as among the key threats.