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Historic High Risk Countries and Client Due Diligence Guidance

30 December 2025

The Solicitors Regulation Authority (SRA) have recently updated their guidance on Geographical risks and reminded firms of their duty to not only be aware of the risks arising…

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Historic High Risk Countries and Client Due Diligence Guidance

The Solicitors Regulation Authority (SRA) have recently updated their guidance on Geographical risks and reminded firms of their duty to not only be aware of the risks arising from those geographic locations which are present on the Financial Action Task Force (FATF) “black list” (sanctioned) and “grey list” (high risk), but also countries known for higher levels of corruption and those which are historic high risk countries.

What Law Firms Should Be Aware Of – High Risk Countries

Whilst firms will be used to identifying clients and monies arising from the grey and black lists, not all firms will be as vigilant about historic countries or those known for corruption.

For the most part, Electronic AML Providers will assist with checks on their current grey and back list countries but may not ‘flag’ historic countries or those known for higher level of corruption. This requires fee earners to be aware of these countries and to ensure they factor them into their risk assessments. Firms must also be aware to include reference to these additional geographic areas in their Firm Wide Risk Assessment and set out the approach to be taken to guide staff.

Firms will have a different approach to each of the types of geographic risk:

Black List – for most firms, they will not allow fee earners to deal with matters where clients are domiciled in or bringing assets in from a black list country (they may allow the handling of a matter for a person who has relocated and is no longer domiciled in the sanctioned jurisdiction and has no assets there).
Grey List – some firms will elect to choose such clients and matters as the same for black list countries, but many firms will be more tolerant of such matters and will allow, subject to MLRO approval and a risk based approach, to provide services to a client from a grey list country or someone who is bringing assets into the UK. This is a sensitive area and needs a full understanding of the risks associated with the client and their assets.
Historic Countries and Countries known for high level of corruption – some firms will overlook the risks attached to these, but they should be approached with some caution and awareness of which countries feature, and it is further recommended that they proceed following a risk assessment and approval of the MLRO. Failure to do so could result in the firm handling high risk assets and finding themselves in regulatory deep water.

Firms need to ensure that fee earners, as part of their risk profiling and risk assessment of clients and matters, have access to those clients who fall into category 3 above and cannot be dependent on their AML check providers.

The SRA set out that following the Brexit transition period, the UK began setting out its own list of HRTCs as set out in Schedule 3ZA of the MLRs 2017 and effective from 22 January 2024, the definition of HRTCs was amended to remove schedule 3ZA of the MLR 2017. It was replaced with the following definition:

‘a country named on either of the following lists published by the Financial Action Task Force (FATF) as they have effect from time to time:

high-risk jurisdictions subject to a call for action
jurisdictions under increased monitoring.’

These are the countries in categories 1 and 2 and as referred to the AML check providers will assist with identification and enable the fee earners to trigger Enhanced Due Diligence under Regulation 33 of the MLR’s 2017.

Regulation 33(6)(c) sets out other matters a Firm must consider when assessing whether a jurisdiction is high risk and includes

whether the country is subject to sanctions, embargos or similar measures issued by, for example, the European Union or the United Nations
whether the country provides funding or support for terrorism
whether the country has been identified by credible sources as having high levels of corruption or poor AML controls.

So how does a fee earner note the last category and respond to the risks?

The SRA have provided links to two useful data bases which can be embedded into the Firm’s Firm Wide Risk Assessment and AML Policy.

Firms can also build awareness through training, ensure that fee earners can access these additional reference lists, consider the features of the client and matter, and ensure the MLRO provides approval to proceed with the transaction and establish ongoing monitoring in accordance with regulations 28 and 33 of the MLRs 2017.

Such matters must then be included in the firm’s high risk register from where the MLRO can supervise and monitor through the transaction.

It is important for firms to remember that fee earners need to check this additional and often forgotten category and to provide fee earners with clear guidance on the action to take when they arise.

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