UK regulators continue to sharpen their focus on geographic risk as a core pillar of effective Anti-Money Laundering (AML) and Counter Terrorist Financing (CTF) frameworks.

Historic High Risk Countries

Recent regulatory guidance has reinforced the obligation on regulated businesses to look beyond the Financial Action Task Force (FATF) “black list” and “grey list” and to actively consider:

• Historic high-risk countries
• Jurisdictions with elevated levels of corruption
• Countries with weak AML or counter-terrorist financing controls

While many regulated firms are comfortable identifying risks linked to sanctioned and monitored jurisdictions, historic and corruption-related geographic risks are often underestimated or overlooked, leaving businesses exposed to regulatory challenge.

The Limits of Automated AML Screening

Most electronic AML and sanctions screening providers are effective at flagging:

• FATF high-risk jurisdictions subject to a call for action (black list)
• FATF jurisdictions under increased monitoring (grey list)

However, these systems may not automatically flag:

• Countries with historic AML deficiencies
• Jurisdictions identified by credible bodies as having high levels of corruption
• Countries with poor enforcement or governance standards

This means regulated businesses cannot rely solely on AML technology. Staff involved in onboarding, compliance, and risk assessment must understand these additional geographic risks and actively factor them into:

• Customer Risk Assessments (CRAs)
• Business-wide or Firm-Wide Risk Assessments
• Ongoing monitoring decisions

Understanding Different Categories of Geographic Risk

Regulated businesses typically take a risk-based approach, with varying responses depending on the type of geographic risk involved.

1. FATF Black List (Sanctioned Jurisdictions)

For most regulated businesses, this will result in an exclusion on entering a business relationship where:

• The customer is domiciled in a sanctioned jurisdiction, or
• Funds or assets originate from a sanctioned country

Limited exceptions may apply where an individual has fully relocated, has no remaining ties or assets in the sanctioned jurisdiction, and enhanced scrutiny confirms legitimacy.

2. FATF Grey List (High-Risk Jurisdictions Under Monitoring)

Approaches vary across regulated sectors. Some businesses treat grey list jurisdictions in the same way as black-listed countries, while others may proceed where:

• Enhanced Due Diligence (EDD) is applied
• A robust risk assessment supports the decision
• Senior management or MLRO approval is obtained

This is a sensitive area and requires a detailed understanding of the customer, source of funds, source of wealth, and the wider transaction or relationship risk.

3. Historic High-Risk Countries and High-Corruption Jurisdictions

This category is frequently overlooked and presents a significant regulatory risk.

While not subject to formal FATF listing, these countries may:

• Have long-standing governance or corruption concerns
• Lack effective AML supervision or enforcement
• Present higher risks of bribery, fraud, or illicit financial flows

Regulated businesses should approach these jurisdictions with heightened caution, supported by:

• Documented risk assessments
• MLRO or senior compliance approval
• Ongoing enhanced monitoring

Failing to do so may result in businesses unknowingly handling high-risk funds or customers—placing them firmly in regulatory difficulty.

Regulatory Expectations and Legal Framework

Following the Brexit transition period, the UK established its own framework for identifying high-risk third countries under the Money Laundering Regulations 2017 (MLRs).

From 22 January 2024, the definition of high-risk third countries was updated and now refers directly to the FATF lists:

• High-risk jurisdictions subject to a call for action
• Jurisdictions under increased monitoring

These align with categories 1 and 2 above and are typically captured by AML screening providers, triggering Enhanced Due Diligence under Regulation 33.

However, Regulation 33(6)(c) makes clear that regulated businesses must also consider other risk indicators, including whether a country:

• Is subject to sanctions, embargoes, or restrictive measures
• Provides funding or support for terrorism
• Has been identified by credible sources as having:
  • High levels of corruption, or
  • Weak AML and CTF controls

Managing Historic and Corruption-Based Geographic Risk in Practice

So how should regulated businesses identify and respond to these less obvious geographic risks?

Regulators highlight the importance of using independent, credible data sources, including:

• Transparency International – Corruption Perceptions Index
• Basel Institute of Governance – AML Index

These tools should be embedded into:

• Business-Wide Risk Assessments
• AML and Financial Crime Policies
• Staff training and onboarding procedures

In addition, businesses should ensure:

• Staff have access to these reference sources
• High-risk relationships are escalated for MLRO or senior approval
• Enhanced monitoring is applied in line with Regulations 28 and 33
• Such cases are recorded within a high-risk customer or relationship register

This allows effective oversight, supervision, and auditability.

A Key Reminder for Regulated Businesses

Historic high-risk countries and corruption-linked jurisdictions are often the most easily missed aspect of geographic risk assessment.

Regulated businesses must:

• Provide clear internal guidance
• Reduce over-reliance on automated AML tools
• Equip staff with knowledge, confidence, and escalation routes

Failing to address this area is increasingly likely to attract regulatory scrutiny, particularly during AML inspections, supervisory visits, or enforcement reviews.

About RACO and Our Services

At the Regulation and Compliance Office (RACO), we support regulated businesses across multiple sectors with the practical management of AML, risk, compliance, and regulatory obligations.

We work closely with:

• MLROs and Nominated Officers
• Compliance and Risk Leaders
• Senior Management Teams

Our services include tailored guidance, training, documentation, and ongoing compliance support—always designed around your business model, sector, and regulatory exposure.

We do not offer templated solutions. Instead, we deliver bespoke, best-practice compliance frameworks that meet regulatory expectations and stand up to scrutiny.

Our Compliance Solutions Support Businesses With:

• UK Money Laundering Regulations 2017
• FCA and other supervisory authority expectations
• Financial crime risk management
• Governance, oversight, and audit readiness

Our comprehensive compliance packages are designed to be cost-effective and scalable, supporting regulated businesses of all sizes.

Key Services Include:

• Outsourced Due Diligence & Risk Assessment: We carry out the due diligence work and prepare risk assessments, so your internal team can focus on review and oversight.

• Anti Money Laundering (AML) Compliance Service: This support service has been designed to provide AML regulated businesses with an effective solution for the management and control of compliance with the Anti Money Laundering Regulations. Our service is an annual subscription that provides Businesses with ongoing support from our compliance team and ensures your Business has in place appropriate and compliant Policies, Controls and Procedures (PCP’s) that are maintained by us.

• Risk, Anti Money Laundering Guidance and Register Administration Service has been designed to provide Businesses and their Money Laundering Reporting Officer (MLRO) with a support function that ensures their regulatory and compliance obligations are fulfilled on an ongoing basis and staff are provided access to ongoing advice as needed.

Talk to our Compliance Experts 

At the Regulation & Compliance Office, we work with businesses to create the necessary documentation and have the processes in place to ensure the business and its staff are thoroughly protected.

To enquire about our services and how we can service your business, call us on 0203 985 8550 or email us at info@regulationandcomplianceoffice.co.uk