Political Discord Threatens EU Anti-Money Laundering Blacklist Integrity

Conflicting agendas between the European Parliament and the European Commission have exposed fault lines in the EU’s management of its anti-money laundering (AML) blacklist, with the ongoing rift shedding light on the technical, political, and strategic challenges that threaten the credibility and functionality of Europe’s AML framework. At the heart of the dispute is the EU’s list of high-risk third-country jurisdictions, a critical tool meant to protect the financial system from money laundering and terrorist financing threats. Yet recent developments—particularly the divergence between the EU’s list and the one maintained by the Financial Action Task Force (FATF)—have deepened concerns over policy coherence and institutional trust.

In the latest round of revisions, the EU added countries such as Algeria, Angola, Kenya, Monaco, and Venezuela to its high-risk list, while removing others, notably Barbados, Gibraltar, Panama, and the United Arab Emirates. These changes, which came with minimal lead time, forced European financial institutions to urgently update internal controls, compliance frameworks, and customer risk assessments—often without clear guidance on how to reconcile inconsistencies with FATF’s global standards. For many institutions, these moves not only carry operational burdens but also strategic implications, as firms struggle to determine how to align their policies with evolving regulatory landscapes.

The decision to delist countries like Panama, Gibraltar, and the UAE became a lightning rod in the debate, provoking strong pushback from the European Parliament. In a resolution adopted in April 2024, Parliament voiced its disapproval, asserting that these jurisdictions had not sufficiently addressed money laundering or terrorist financing risks. Moreover, the resolution cited “credible evidence” that some of these countries actively facilitated sanctions evasion, particularly concerning entities tied to Russia’s invasion of Ukraine. Lawmakers warned that delisting could create loopholes for sanctioned Russian assets to flow through less regulated financial systems, thus compromising the EU’s sanctions regime and broader geopolitical posture.

Behind the political impasse lies a deeper disagreement over methodology and scope. The FATF list, though globally recognized, does not always align with the EU’s priorities—especially regarding enforcement of European sanctions. Some lawmakers argue that the Commission’s updates appear to simply “mirror FATF decisions,” lacking sufficient adaptation to European strategic concerns. Others contend that the Commission’s list fails to adequately consider geopolitical and security threats, including the need to close off financial channels that could be exploited by sanctioned regimes.

This discord has tangible consequences for compliance teams and regulated firms. Financial institutions across Europe now face the unenviable task of navigating dual standards—those of the EU and those of the FATF—without a clear indication of which should take precedence. This duality introduces legal uncertainty, drives up compliance costs, and raises the risk of either over-compliance, which can stifle legitimate business, or under-compliance, which can lead to enforcement actions and reputational damage.

Under the EU’s Fourth and Fifth Anti-Money Laundering Directives—Directives (EU) 2015/849 and 2018/843—regulated firms are obliged to apply enhanced due diligence to clients and transactions involving high-risk countries. However, discrepancies between the EU and FATF lists complicate enforcement. In some cases, institutions have no choice but to treat non-listed jurisdictions with heightened caution, just in case regulators later determine they should have been classified as high-risk. This reactive posture undermines the very purpose of the blacklist: to provide clarity and predictability in risk management.

The foreign policy dimension of the blacklist also cannot be ignored. For many third countries, inclusion or exclusion from the EU’s list carries economic, diplomatic, and reputational consequences. Protests from governments recently listed or delisted have added further strain to the EU’s foreign relations. This friction can spill over into unrelated policy areas, disrupting negotiations, trade talks, and multilateral cooperation. In addition, the EU’s growing divergence from FATF norms is raising eyebrows globally. Critics argue that the bloc risks losing its influence over international AML/CFT standards if its own internal procedures appear fragmented or politicized.

MEPs pushing for a stricter, more autonomous European list say the current approach lacks transparency and consistency. Meanwhile, the European Commission insists that countries removed from the list had made verifiable improvements, either through legal reforms, compliance enhancements, or increased cooperation with EU financial intelligence units. But lawmakers remain skeptical, warning that progress can be easily reversed, especially in countries with opaque financial systems or limited enforcement capacity.

The tension is playing out at a critical moment for Europe’s AML reform efforts. The forthcoming European Anti-Money Laundering Authority (AMLA), based in Frankfurt, is meant to provide greater harmonization across member states. Once operational, AMLA will oversee consistent application of AML/CFT measures and help bridge gaps between EU institutions and international bodies like FATF. Yet the current discord could undermine the new agency before it even begins its work. A fragmented blacklist system may limit AMLA’s effectiveness, as conflicting priorities between Parliament and Commission remain unresolved.

Sanctions enforcement remains one of the most contentious elements in the debate. Lawmakers worry that jurisdictions removed from the blacklist, such as the UAE or Panama, could become safe havens for sanctioned Russian oligarchs and companies. These fears are not unfounded, given recent revelations about attempts to evade EU sanctions through complex financial channels. “The delisting of certain countries sends the wrong signal,” MEPs have argued, “and risks weakening the EU’s collective response to Russia’s aggression.”

From a compliance and operational standpoint, regulated firms are left in a difficult position. Those that prioritize FATF standards may inadvertently fall short of stricter EU obligations—or vice versa. This regulatory uncertainty introduces unnecessary risk into financial operations, making it harder to vet counterparties, approve transactions, or expand into new markets. Firms may also face backlash from stakeholders or clients who question why they are engaging with jurisdictions deemed high-risk by one authority but not the other.

The road ahead is fraught with complexity, but not without solutions. A more integrated, transparent, and predictable process for compiling and updating the EU’s AML blacklist is essential. The creation of AMLA presents a unique opportunity to centralize risk assessments, coordinate closely with global partners, and standardize the evidentiary thresholds required for listing or delisting jurisdictions. This would provide much-needed clarity to financial institutions, enhance international cooperation, and restore confidence in the EU’s AML/CFT system.

Ultimately, the clash between the European Parliament and Commission is more than a procedural disagreement—it’s a test of the EU’s capacity to balance security, diplomacy, and regulatory coherence in an increasingly complex financial world. The stakes are high, not only for lawmakers and policymakers, but for every bank, payment processor, and investor seeking to operate within the boundaries of lawful, transparent finance. If the EU hopes to maintain its leadership in the global fight against financial crime, it must find common ground—bridging political divisions with technical precision and international alignment.

By fLEXI tEAM