BaFin Circular 07/2023 (GW) – High-Risk Third Countries
The BaFin Circular 07/2023 (GW), addressing the effective management of money laundering (ML), terrorist financing (TF), and proliferation financing risks in financial services, provides comprehensive guidelines and legal consequences for entities under BaFin supervision in Germany. Here’s a summary of its key contents:
I. EU and FATF Country Lists for Deficiencies in ML/TF and Proliferation Financing
- EU Delegated Regulation: Based on Article 9 of the Fourth Money Laundering Directive (EU) 2015/849, the EU Commission established high-risk third countries with the Delegated Regulation (EU) 2016/1675, last amended by Delegated Regulation (EU) 2023/1219.
- Listed Countries: Includes North Korea, Iran, Afghanistan, Barbados, Burkina Faso, D.R. Congo, Gibraltar, Haiti, Jamaica, Yemen, Jordan, Cayman Islands, Mali, Mozambique, Myanmar, Nigeria, Panama, Philippines, Senegal, South Africa, South Sudan, Syria, Tanzania, Trinidad and Tobago, Uganda, United Arab Emirates, and Vanuatu.
- FATF Statement: The FATF maintains its „High-Risk Jurisdictions subject to a Call for Action“ statement, particularly for North Korea, Iran, and Myanmar, urging enhanced due diligence proportional to the risks posed by these countries.
II. BaFin’s Legal Consequences and Measures for Listed High-Risk Countries
- North Korea:
- Enhanced due diligence for business transactions involving North Korea or North Korean residents.
- Additional measures for identifying beneficial owners, especially for legal entities.
- German financial institutions must scrutinize foreign banks with which they have correspondent relationships, particularly regarding accounts held by North Korean entities.
- Implementation of the FATF’s call for countermeasures, including mandatory reporting of all business relationships and transactions related to North Korea to BaFin.
- Iran:
- Similar enhanced due diligence requirements as for North Korea.
- Mandatory reporting of all business relationships and transactions related to Iran.
- Increased supervision of branches and subsidiaries of Iranian financial institutions.
- Other Listed Countries (Afghanistan, Barbados, etc.):
- Enhanced due diligence for transactions involving these countries.
- Specific attention to Myanmar, following FATF’s statement, ensuring that financial flows for humanitarian aid and legitimate charitable activities are not disrupted.
- Countries Under Increased FATF Monitoring (Albania, Cameroon, Croatia, Turkey, Vietnam):
- No immediate mandatory actions, but their situations should be considered in ML/TF risk assessments.
- Additional Notes:
- The circular replaces previous ones on EU and FATF country lists related to ML/TF and proliferation financing deficiencies.
- Reference to sanctions published by the Deutsche Bundesbank, especially regarding Russia.
- Consideration of findings in the National Risk Analysis regarding cross-border threats.
The Circular emphasizes the importance of heightened vigilance and due diligence for transactions involving high-risk countries, aligning with EU and FATF recommendations to mitigate ML/TF risks in the financial sector.