UK's HM Treasury Urges Companies to Implement Tougher Safeguards in Business Dealings with High-Risk Nations
In a move to bolster its anti-money laundering (AML) and counter-terrorist financing (CTF) efforts, the UK HM Treasury has released updated recommendations for businesses operating in high-risk countries. These countries, including the Democratic People's Republic of Korea and Iran, require enhanced due diligence (EDD) due to their elevated risk levels.
The updated guidelines focus on strengthening regulatory clarity, risk-based approaches, and closing loopholes to more effectively mitigate illicit finance risks. The UK government aims to maintain its global leadership in tackling economic crime by improving the effectiveness of its Money Laundering Regulations (MLRs).
A key aspect of the new recommendations is the emphasis on a risk-based approach, aligning with the Financial Action Task Force (FATF) global standards. This means businesses must apply enhanced due diligence when operating with or through high-risk jurisdictions identified by FATF and the EU.
The UK government has also updated its MLRs to make requirements clearer and more targeted, addressing existing loopholes and emerging threats related to high-risk countries. This supports the UK’s ambition to maintain global leadership in combating economic crime.
Collaborative efforts across government departments, regulators, law enforcement, and the private sector are also highlighted in the UK's AML/CTF framework. These collaborations aim to comprehensively respond to money laundering and terrorist financing challenges posed by high-risk countries.
The FATF's list of high-risk third countries, which businesses must observe closely, was updated most recently in mid-2025, including additions such as Bolivia and the UK Virgin Islands. UK authorities expect businesses to adopt enhanced scrutiny of transactions involving these jurisdictions and apply the revised recommendations fully by 2030.
In the payments sector, regulatory consultation is ongoing to consolidate functions under the Financial Conduct Authority (FCA) for better oversight. FATF continues to develop further guidance (expected late 2026) on transparency for international payments connected to high-risk jurisdictions.
Businesses are urged to take into account regularly updated "geographical risk factors" and statements by the FATF to help identify high-risk countries and assess their AML/CTF policies. Moreover, businesses are encouraged to maximize the efficiency of communication across compliance, risk, reporting, board, and executive teams to ensure the relevance of financial crime policies and procedures.
All businesses dealing with high-risk countries have to implement certain risk-relevant measures to protect themselves and the international financial system. The HM Treasury divides risky jurisdictions into two types: those that definitely require EDD and those that might need to have EDD applied in certain high-risk situations.
The UK HM Treasury's updated recommendation for businesses to apply enhanced customer due diligence measures and monitoring to those located in high-risk regions underscores the importance of adhering to these guidelines to maintain the integrity of the global financial system. Businesses are advised to avoid potential damage from the high-risk countries mentioned in the advisory notice.
- To tackle the illicit finance risks associated with high-risk countries such as the Democratic People's Republic of Korea and Iran, businesses operating in these regions should apply enhanced due diligence (EDD), as recommended by the UK HM Treasury, to align with the Financial Action Task Force (FATF) global standards.
- Following the UK HM Treasury's updated recommendations, businesses dealing with high-risk countries must implement thorough risk-relevant measures, including enhanced customer due diligence and monitoring, to protect themselves and the international financial system, while maintaining regulatory clarity and complying with the Money Laundering Regulations (MLRs).
