Strengthened Financial Controls Lead to Removal from High-Risk List

by | Apr 26, 2024 | Business Law, Gibraltar news, Solicitors | 0 comments

Gibraltar’s Status Update: Strengthened Financial Controls Lead to Removal from High-Risk List

Gibraltar has recently bolstered its position as a global financial hub, following significant enhancements to its financial regulatory framework. In a notable development, the European Commission in February 2024 excised Gibraltar from its roster of high-risk third countries, previously flagged for “strategic deficiencies” in anti-money laundering (AML) and countering the financing of terrorism (CFT) protocols. This decision, activated last week, reflects Gibraltar’s concerted efforts to fortify its financial controls, addressing the issues spotlighted by the Financial Action Task Force (FATF).

Under the Fourth Anti-Money Laundering Directive (4MLD), adopted by the EU in 2017, a structured legal approach was established to deter and fight money laundering and terrorist financing. This Directive allows the European Commission, via Article 9(2), to list countries as high-risk if they exhibit deficiencies as identified by the FATF, an authoritative body setting global standards for AML/CFT. Being listed as high-risk can severely impact a jurisdiction, potentially obstructing financial transactions and deterring investors.

In December 2017, Gibraltar found itself on the EU’s high-risk list, prompted by AML/CFT framework concerns. Although not formally blacklisted, this status cast doubt on Gibraltar’s financial transparency and regulatory compliance, following the FATF’s identification of necessary improvements in Gibraltar’s AML/CFT practices, leading to its placement on the ‘grey list’ for increased monitoring. Gibraltar’s government robustly disputed the EU’s assessment, asserting that it had already enacted substantial reforms to align with FATF’s expectations.

These reforms were comprehensive, enhancing customer due diligence processes, including rigorous verification of client identities and the origins of their wealth. Financial institutions in Gibraltar were also mandated to conduct more detailed risk assessments to detect and prevent money laundering and terrorist financing. Moreover, Gibraltar improved its international cooperation, taking significant steps to work closely with global law enforcement bodies to exchange information and combat transnational financial crimes.

Gibraltar’s proactive engagement with the FATF, addressing all the specified concerns, led to its recognition as a compliant jurisdiction last month. Following this, the European Commission promptly removed Gibraltar from the high-risk list. This reclassification is anticipated to elevate investor trust in Gibraltar’s financial market integrity. Practically, it also simplifies the administrative processes for financial transactions linked to Gibraltar-based entities, marking a pivotal step in reinforcing the territory’s standing as a trusted financial centre.

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Gibraltar offers a unique and attractive environment for entrepreneurs and businesses. Its strategic location, favourable tax regime, and robust legal framework make it a desirable destination for companies. However, understanding the legal requirements and best practices for establishing a business in Gibraltar is crucial for success.

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