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EU Tightens Screws on High-Risk Jurisdictions: What It Means for Financial Institutions

The European Union has recently introduced new regulations aimed at high-risk third-country jurisdictions, requiring European financial institutions to enhance their due diligence on transactions stemming from identified nations. This move comes amid growing concerns over the lack of effective anti-money laundering frameworks in some countries.

The Background

The Financial Action Task Force (FATF), a global watchdog, has placed several jurisdictions on its gray list, including the United Arab Emirates (UAE). While the UAE’s leadership has been keen to remove itself from this list and has recently succeeded in doing so, experts argue that the reforms are still lacking in substance. Transparency International has criticized the country’s on-paper changes, saying they have yet to be implemented effectively.

The Implications for Sudan

In the context of Sudan, the EU’s new regulations could have significant implications. The country has been plagued by conflict, corruption, and human rights abuses. Foreign actors, including Egypt, Iran, Russia, and the UAE, are seen as playing a significant role in propping up the crisis.

The FATF’s gray listing of the UAE has already led to increased scrutiny over its dealings with Sudan. The EU’s new regulations could further restrict financial transactions between European institutions and companies linked to the UAE or other high-risk jurisdictions.

What Can Be Done?

To effectively address the situation in Sudan, experts recommend a multifaceted approach that combines diplomatic pressure with targeted sanctions and support for pro-democracy groups.

• The US administration must be willing to apply financial pressure on key actors, including Egypt, Iran, Russia, and the UAE.
• This could involve increased scrutiny of financial transactions, network-based sanctions designations, and information-sharing with the FATF.
• At the same time, the US should increase its material support for pro-democracy, anti-corruption, and pro-peace Sudanese groups, as well as community-level efforts to deliver humanitarian assistance.

A Message of Resolve

The war engulfing Sudan is no simple ethnic conflict or power struggle between two warlords. Successive regimes have constructed a kleptocracy built on violence and repression, and the country is now being relentlessly plundered by foreign actors.

• The US has a vital interest in supporting democracy worldwide and helping restore Sudan’s democracy would make an important statement about its commitment to supporting African democracy and peacemaking.
• By applying financial and diplomatic pressure on key actors, the US can drive peace instead of war and help bring an end to the devastating conflict in Sudan.