Conflicting priorities between the European Parliament and the European Commission have placed the EU’s approach to anti-money laundering blacklists under a harsh spotlight. The ongoing disagreement, especially regarding the inclusion and removal of certain countries from the EU’s list of high-risk third-country jurisdictions, has created a complex landscape for financial institutions, compliance officers, and policy makers. This discord not only highlights technical gaps but also reveals deeper political and strategic rifts that can undermine the effectiveness of Europe’s AML regime.

The most recent round of updates to the EU’s blacklist, which notably diverged from the Financial Action Task Force (FATF) global list, reignited debate over the effectiveness, legitimacy, and transparency of Europe’s risk-based approach. Key changes in the EU list, such as the addition of Algeria, Angola, Kenya, Monaco, and Venezuela, and the removal of countries like Barbados, Gibraltar, Panama, and the United Arab Emirates, have significant implications for banks, asset managers, and businesses across Europe. These adjustments require companies to update internal controls and compliance programs—often on short notice—while trying to reconcile differences with global standards set by the FATF.

Political Stalemate and Impact on AML/CFT Alignment

The divergence between the EU and FATF blacklists is not simply a bureaucratic issue; it stems from fundamental disagreements about how best to assess AML and counter-financing of terrorism (CFT) risks, as well as the political ramifications of listing or delisting jurisdictions. Over the past eighteen months, the EU has not fully aligned its blacklist with the FATF’s own “grey” and “black” lists, a move that has caused friction with international partners and regulators.

A major flashpoint centers on the removal of Gibraltar, Panama, and the UAE from the EU blacklist. The European Parliament, in a resolution adopted in April 2024, strongly opposed this decision, citing credible evidence that these countries have either failed to adequately address money laundering and terrorist financing risks or, in some cases, actively facilitated evasion of sanctions—particularly those related to Russia’s invasion of Ukraine. MEPs argue that the delisting of these countries opens the door for sanctioned Russian entities to move assets or conduct transactions through less stringent jurisdictions, ultimately weakening the effectiveness of the EU’s economic measures.

This political stalemate has practical consequences for regulated entities. European financial institutions must comply with both EU and FATF requirements, leading to confusion, additional costs, and, in some cases, legal uncertainty. Regulatory arbitrage becomes more likely, as criminals and facilitators seek to exploit differences between lists. Meanwhile, the lack of harmonization increases the risk of the EU’s financial system being exposed to high-risk transactions that would otherwise be flagged or prevented under a more unified regime.

Regulatory Complexities and Practical Compliance Burdens

From a compliance perspective, the misalignment between the EU and FATF lists means that banks, asset managers, and other regulated businesses are forced to navigate two sets of standards. Firms operating across jurisdictions must regularly update their internal AML/CFT controls to reflect both the evolving EU and FATF lists, often with little lead time. This can result in significant resource outlays as compliance departments scramble to assess customer relationships, review cross-border transactions, and adjust due diligence procedures.

Legal obligations under the EU’s Fourth and Fifth Anti-Money Laundering Directives (Directives (EU) 2015/849 and 2018/843), as well as the directly applicable AML Regulation (once adopted), require enhanced due diligence on customers or transactions involving countries listed as high-risk. However, when these lists differ from FATF’s, regulated firms must determine which standard prevails for their business model, product offerings, and customer base.

The consequences extend beyond mere paperwork. Divergent blacklists may lead to inconsistent application of enhanced due diligence, possible delays in legitimate business, and even the loss of business opportunities for European firms due to over-compliance or uncertainty about counterparties’ risk status. Conversely, a less restrictive list could leave gaps in controls and facilitate illicit financial flows, potentially exposing EU financial institutions to regulatory sanctions, reputational harm, and increased risk of being used to launder proceeds from crime or evade sanctions.

Political Dynamics and International Reputational Risks

The EU’s AML blacklist is more than a technical tool—it is a significant lever of foreign policy, trade relations, and international reputation. Disagreement over the composition and timing of updates to the list has sparked tension between European lawmakers, the Commission, and the governments of affected third countries. For example, diplomatic protests from delisted or newly listed countries can slow down other policy negotiations, disrupt trade, or trigger retaliatory measures. Additionally, the perception that the EU is not fully aligned with the FATF weakens its ability to shape global AML/CFT standards and puts at risk the credibility of its regulatory framework.

Some MEPs have argued that the Commission’s approach appears to simply “copy” FATF decisions, while others counter that the Commission does not go far enough to ensure the EU list reflects unique European security concerns, such as the enforcement of sanctions related to Russia. This debate highlights the inherent tension between technical objectivity and political sensitivity in compiling high-risk country lists.

The stakes are particularly high given the EU’s ongoing reforms in AML supervision, including the establishment of the European Anti-Money Laundering Authority (AMLA) in Frankfurt. One of AMLA’s future roles will be to oversee uniform application of AML/CFT measures and coordinate with both the European and global regulatory community. However, the current impasse risks delaying or undermining AMLA’s effectiveness from the outset.

Implications for Sanctions Enforcement and Financial Stability

One of the central concerns raised by Parliament is the risk that removing countries like the UAE, Panama, or Gibraltar from the blacklist could undermine efforts to enforce EU sanctions—particularly those directed at Russian assets and actors. The ability of sanctioned individuals or entities to use alternative jurisdictions as a backdoor into the European financial system represents a serious vulnerability, especially as Russia continues to seek ways to access international markets despite Western economic restrictions.

Parliamentary critics contend that the evidence base for delisting remains insufficient and that more robust monitoring is needed to prevent circumvention of sanctions. While the Commission maintains that affected jurisdictions have made tangible progress—through technical assistance, legal reforms, or increased cooperation—lawmakers warn that progress can be quickly reversed, and that the reputational risks to the EU of prematurely delisting countries are substantial.

At the same time, delays in updating the blacklist or disagreements over its composition can create confusion for European banks and businesses, particularly those operating globally. Entities may find themselves exposed to legal challenges if they fail to apply the most stringent standard available, while over-compliance can result in lost business and a competitive disadvantage. These tensions point to the need for better coordination not only within the EU’s political institutions but also with international partners such as the FATF, the United States Treasury, and other G7 countries.

The Road Ahead: Reform, Cooperation, and the Future of AML Blacklists

Moving forward, the EU faces significant challenges in resolving the current dispute and ensuring that its AML/CFT blacklist remains credible, effective, and fit for purpose. This will require a careful balancing act between technical rigor, political consensus, and alignment with international best practices. Key questions include how to integrate parliamentary oversight and Commission expertise, how to ensure timely and transparent updates to the list, and how to coordinate more closely with global partners.

The establishment of AMLA offers a potential avenue for improved governance and harmonization, but much will depend on its mandate, resources, and ability to act as a bridge between EU and international standards. A clear, transparent, and predictable process for adding and removing countries from the blacklist is essential for both regulatory certainty and effective risk management.

At the operational level, financial institutions must invest in systems and expertise that allow them to rapidly adapt to changes in both the EU and FATF lists. Ongoing training, scenario analysis, and robust dialogue with regulators will be essential for maintaining compliance and managing risk in a volatile environment.

Conclusion: Navigating Uncertainty in the EU’s Money Laundering Blacklist

The dispute between the European Parliament and the Commission over the EU anti-money laundering blacklist exposes deeper questions about how best to protect Europe’s financial system from criminal abuse, enforce sanctions, and maintain international credibility. The current impasse creates real-world challenges for compliance teams, increases costs, and risks regulatory gaps that could be exploited by criminals.

To restore trust and effectiveness, EU institutions must find a path toward greater transparency, coordination, and alignment with global standards—while retaining the flexibility to address unique European security priorities. Only by bridging the political and technical divide can the EU ensure that its blacklist remains a credible pillar in the global fight against financial crime.

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Related Links

• Official EU High-Risk Third Countries List
• Financial Action Task Force (FATF) Public Statements
• EU Fourth Anti-Money Laundering Directive
• EU Fifth Anti-Money Laundering Directive
• European Anti-Money Laundering Authority (AMLA) Overview

Other FinCrime Central Articles About the EU’s List of High-Risk Countries

• Shifts in FATF High-Risk Jurisdictions Demand Stronger Compliance in 2025
• Shake-Up in EU AML Landscape as Grey List Sees New Entrants and Departures

Source: Euronews, by Paula Soler

Some of FinCrime Central’s articles may have been enriched or edited with the help of AI tools. It may contain unintentional errors.

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