European Commission Designates Russia as “High-Risk Third Country” Over AML/CFT Deficiencies

The European Commission has formally classified Russia as a “high-risk third country,” pointing to long-standing and systemic weaknesses in its anti-money laundering and counter-terrorist financing framework. The decision follows an in-depth technical assessment that drew on publicly available information, findings from authorities in EU member states, and evaluations conducted by the European External Action Service (EEAS). The Commission concluded that Russia’s financial system does not meet the standards necessary to safeguard the integrity of the European Union’s financial markets.

Within the EU’s regulatory framework, the designation carries tangible consequences rather than serving as a symbolic measure. It automatically activates stricter compliance obligations and enhanced due diligence requirements for both financial and non-financial entities operating within the EU when they deal with Russian-linked individuals, companies, or assets. As a result, banks, payment service providers, fintech firms, and other obliged entities will be required to apply enhanced customer due diligence (CDD), obtain more detailed information on beneficial ownership, closely monitor transactions with Russian connections, and regularly reassess their exposure to related risks.

The move stems from a broader review conducted in 2025 under the 4th Anti-Money Laundering Directive (4AMLD), following a commitment by the Commission to reassess jurisdictions whose membership in the Financial Action Task Force (FATF) has been suspended. Given that Russia falls into this category, the review determined that it meets the criteria for inclusion on the EU’s list of high-risk jurisdictions. According to the Commission, the objective of the listing is to protect the EU financial system from potential abuse, including the laundering of illicit proceeds, the financing of terrorism, or the facilitation of war-related or criminal financial flows originating from, or passing through, Russia.

For companies and clients with Russian ties, the implications are significant. Financial institutions may introduce more demanding verification processes, request additional documentation, and experience an increase in rejected or delayed transactions. For individuals and organizations linked to Russia, access to EU financial services and trade channels is expected to become substantially more difficult. While the designation does not constitute an outright prohibition, the heightened scrutiny and stricter risk thresholds reflect a deliberate tightening of financial controls.

The regulation is now subject to a short review period by the European Parliament and the Council of the European Union, which have up to one month — with the option of a one-month extension — to raise objections. Should neither institution object within this timeframe, the measure will take effect, formally cementing Russia’s status as a high-risk jurisdiction under EU law until such time as it implements credible reforms to its AML/CFT regime.

Beyond its immediate regulatory impact, the decision highlights a broader strategic approach. By reinforcing financial-system defenses alongside sanctions, the European Union aims to close off channels that could be used to move illicit or war-related funds. With Russia now officially identified as having strategic deficiencies, pressure is being applied not only through sanctions policy, but also through the day-to-day mechanics of financial compliance across the EU.

By fLEXI tEAM