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Businesses Must Be Aware of Different Risks in Each Country
As businesses operate globally, they must be aware that each country presents different risks to both Money Laundering (ML) and Terrorist Financing (TF). These risks can arise from the prevalence of certain predicate offenses, funding of terrorist activities, or lack of effective controls to prevent either.
Fortunately, international standard-setting bodies like the Financial Action Task Force (FATF) and its regional bodies conduct detailed evaluations of the effectiveness of controls in each jurisdiction. These reports can be easily accessed on the FATF website at [http://www.fatf-gafi.org/publications/mutualevaluations/?hf=10&b=0&s=desc(fatf_releasedate)].
High-Risk Jurisdictions
The Financial Services Commission (FSC) uses a broader definition of High Risk Jurisdictions than the FATF definition. This captures transaction data with countries that are either drug producers or transit countries for drugs and conflict zones, as well as countries close to those areas.
FATF High-Risk Jurisdictions
- Bahamas
- Botswana
- Cambodia
- Democratic People’s Republic of Korea (DPRK)
- Ghana
- Iceland
- Iran
- Mongolia
- Pakistan
- Panama
- Syria
- Trinidad and Tobago
- Yemen
- Zimbabwe
Gibraltar’s customer base in financial services is only marginally derived from FATF High-Risk Jurisdictions, but businesses should still be aware of the risks associated with these countries.
Conflict Zones
Countries affected by conflict also present a risk to ML and TF. These zones often lack effective controls, making it easier for criminals to launder money or finance terrorist activities.
Drug Trafficking/Producing Countries
- Countries involved in drug trafficking or production are another high-risk area for ML and TF. The illegal drug trade generates vast amounts of cash, which can be easily laundered through financial systems.
EU and EEA Jurisdictions
While EU and EEA countries are generally considered to have robust anti-money laundering and counter-terrorist financing systems in place, businesses should still conduct their own assessments based on the published Mutual Evaluation Reports (MER) results. These reports demonstrate that not all EU/EEA countries meet the required standards.
Threat and Vulnerability Assessment
| Region | Threat | Vulnerability | Score |
|---|---|---|---|
| Spain | 3 | 2 | 5 |
| Morocco | 2 | 2 | 4 |
| FATF High-Risk Jurisdictions | 3 | 1 | 4 |
| Conflict Zones | 2 | 1 | 3 |
| Drug Trafficking/Producing Countries | 3 | 2 | 5 |
| EU and EEA Jurisdictions | 2 | 1 | 3 |
Transnational Crimes
Organized Crime Groups (OCGs) are a significant threat to Gibraltar’s financial system. These groups often operate in Spain, and their influence is growing. It is likely that they will use Gibraltar as a placement location for their funds or integrate and layer their activities through Gibraltar-based businesses.
There is no evidence to suggest that OCGs in Spain are using their illegal activities to finance terrorist activities. However, the private and public sectors must be aware of these risks and take steps to mitigate them.
Tobacco
The origins of many Spanish OCGs are rooted in illegal tobacco, including counterfeit tobacco and the importation of tobacco into Spain without payment of duties. The latter is often used to finance other criminal activities.