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Saudi Arabia added to draft list of countries posing threat to EU: Report

European Commission adds Saudi Arabia to draft list for its lax controls on terrorism financing, Reuters reports
Saudi Arabia falls short in combatting money laundering and terrorism financing, global finance task force says (Reuters)

The European Commission has added Saudi Arabia to an EU draft list of countries that pose a threat to the bloc because of lax controls against terrorism financing and money laundering, two sources told Reuters on Friday.

The EU's list currently consists of 16 countries, including Iran, Iraq, Syria, Afghanistan, Yemen and North Korea, and is mostly based on criteria used by the Financial Action Task Force (FATF), a global body formed by developed nations.

The draft list has been updated to address new criteria developed by the EU Commission since 2017. Saudi Arabia is one of the countries added to the updated list that is still confidential, one EU source and one Saudi source told Reuters.

Under the new EU methodology, jurisdictions may also be blacklisted if they do not provide sufficient information on ownership of companies or if their rules on reporting suspicious transactions or monitoring financial customers are considered too lax.

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Saudi Arabia missed out on gaining full FATF membership in September after it was determined to fall short in combatting both money laundering and terror financing, Reuters said.

Apart from reputational damage, inclusion in the list complicates financial relations with the EU. The bloc's banks must carry out additional checks on payments involving entities from listed jurisdictions.

Saudi authorities did not immediately respond to Reuters’ request for comment.

The move marks a setback for Riyadh at a time when it has launched a charm offensive to bolster its international reputation in order to encourage foreign investors to participate in a huge transformation plan and improve financial ties for its banks.

Pressure over Khashoggi murder

It also comes amid heightened international pressure after the murder of Saudi journalist Jamal Khashoggi in the kingdom's Istanbul consulate on 2 October.

Khashoggi, a columnist for the Washington Post and a critic of Crown Prince Mohammed bin Salman (MBS), was killed and dismembered by Saudi agents, provoking widespread revulsion and damaging the kingdom's image.

While US senators and the CIA have concluded that MBS ordered Khashoggi's assassination, Saudi officials have repeatedly denied the crown prince was involved.

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Human rights groups and others have rejected the official denials, repeatedly calling for an independent and credible investigation.

The provisional decision to include Saudi Arabia must be endorsed by the 28 EU states before being formally adopted next week.

A second EU official said other countries are likely to be added to the final list, but declined to elaborate as the information is still confidential and subject to change.

An EU commission spokesman said he had no comment on the content of the list as it had not been finalised.

Reuters did not say when the list would be finalised or released.

Countries are blacklisted if they "have strategic deficiencies in their anti-money laundering and countering the financing of terrorism regimes that pose significant threats to the financial system of the Union," the existing EU list says.

Saudi Arabia’s government has taken steps to beef up its efforts to tackle graft and abuse of power, Reuters said, but FATF said in September that Riyadh was not effectively investigating and prosecuting individuals involved in larger scale money laundering activity or confiscating the proceeds of crime at home or abroad.

The EU reviewed 47 jurisdictions, including the United States, Russia and Switzerland, before updating its list. EU countries were not screened.