The European Commission has added Saudi Arabia to a European Union draft list of countries that pose a threat to the bloc because of lax controls against “terrorism financing” and “money laundering”, sources told Reuters news agency.
The move comes amid heightened international pressure on Saudi Arabia following the brutal murder of Saudi journalist Jamal Khashoggi.
The EU’s list currently consists of 16 countries, including Iran, Iraq, Syria, Afghanistan and North Korea, and is mostly based on criteria used by the Financial Action Task Force (FATF), a global body of wealthy nations meant to combat “money laundering” and “terrorism financing”.
The list has been updated this week, using new criteria developed by the European Commission since 2017. Saudi Arabia is one of the countries added to the updated list that is still confidential, one unidentified EU source and one unnamed Saudi source were quoted as saying.
A second EU official said other countries were likely to be added to the final list but declined to elaborate as the information is still confidential and subject to change.
A European Commission spokesman said he had no comment on the content of the list as it had not been finalised yet.
Saudi authorities did not immediately respond to the requests for comment.
The move is a setback for Riyadh at a time when it is striving 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.
His gruesome murder and Saudi Arabia’s shifting narrative over his death provoked widespread criticism and damaged the kingdom’s image.
Apart from reputational damage, the inclusion on the list complicates financial relations with the EU. The bloc’s banks will have to carry out additional checks on payments involving entities from listed jurisdictions.
The provisional decision needs to be endorsed by the 28 EU states before being formally adopted next week.
Saudis fall short
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.
Under the new EU methodology, jurisdictions could 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.
Saudi Arabia missed out on gaining full FATF membership in September after it was determined to fall short in “combating money laundering and terrorist financing”.
The government has taken steps to beef up its efforts to tackle corruption and abuse of power, but FATF said in September that Riyadh was not effectively investigating and prosecuting individuals involved in large-scale money laundering activity, or confiscating the proceeds of crime at home or abroad.