The Challenge of High-Risk Jurisdictions
Money services businesses frequently operate remittance corridors to countries that international bodies have identified as having weak anti-money-laundering and counter-terrorist-financing (AML/CFT) frameworks. For UK MSBs, managing this geographic risk is one of the most significant compliance challenges, and one of the primary areas of FCA supervisory focus.
This guide explains the regulatory framework for high-risk jurisdiction management, the enhanced due diligence requirements that apply and practical strategies for maintaining compliant operations. The short answer for 2026: mandatory enhanced due diligence (EDD, meaning extra checks such as source of funds and senior approval) applies to countries on the FATF call for action list; grey-list countries must still be risk-assessed; and every customer and payment must be screened against the UK Sanctions List.
| List | Who publishes it | What it means for a UK MSB |
|---|---|---|
| FATF call for action (black list) | FATF | Mandatory EDD and countermeasures. Currently Iran, North Korea and Myanmar |
| FATF increased monitoring (grey list) | FATF, updated after each plenary | Geographic risk factor in the risk assessment; EDD where the risk requires it |
| UK Sanctions List | FCDO | Screening obligation; asset freezes and prohibitions apply |
Understanding the Risk Lists
UK MSBs must navigate multiple overlapping risk classifications:
FATF High-Risk Jurisdictions (Black List): The Financial Action Task Force identifies jurisdictions with strategic AML/CFT deficiencies subject to a call for action. Currently, Iran, North Korea and Myanmar are on this list; for Myanmar the FATF calls for enhanced due diligence scaled to the risk rather than full countermeasures. Since 30 June 2026, the MLR 2017 requires mandatory enhanced due diligence for business involving these countries, and in practice most MSBs do not accept business from them.
FATF Jurisdictions Under Increased Monitoring (Grey List): These are countries that have committed to addressing identified AML/CFT weaknesses within agreed timeframes. The grey list changes after each FATF plenary. At the June 2026 plenary, Bosnia and Herzegovina and Iraq were added and Algeria and Namibia were removed. Since 30 June 2026, grey-list status is no longer an automatic trigger for mandatory EDD, but it remains a geographic risk factor that MSBs must weigh, and EDD still applies wherever the risk assessment shows higher risk.
The UK definition of high-risk third country: The UK used to keep its own list in Schedule 3ZA of the MLR 2017. The Money Laundering and Terrorist Financing (High-Risk Countries) (Amendment) Regulations 2024 removed Schedule 3ZA from January 2024 and replaced it with a direct reference to the FATF lists as they have effect from time to time. MSBs should therefore check the FATF lists after every plenary.
Sanctions lists: Separate from AML risk lists, the UK Sanctions List published by the FCDO has been the single source of UK sanctions designations since 28 January 2026, and the OFSI Consolidated List is no longer updated. MSBs must screen all customers and transactions against it. Operating a remittance corridor to a jurisdiction subject to comprehensive sanctions (e.g., Russia, Syria) requires extreme caution and specialist legal advice.
Enhanced Due Diligence Requirements
Under regulation 33 of the MLR 2017, enhanced due diligence is mandatory for any business relationship or transaction with a person established in a high-risk third country, which since 30 June 2026 means a country on the FATF call for action list. MSBs should apply the same measures wherever their risk assessment rates a corridor as high risk, including many grey-list corridors. In practice this means:
- Source of funds: the firm should establish the source of funds for transactions involving a high-risk jurisdiction, not just those that appear unusual. Documentation such as payslips, bank statements or sale proceeds should be obtained and verified
- Source of wealth: for ongoing or high-value relationships, the firm should also understand the customer's overall source of wealth
- Purpose of the transaction: the firm must obtain and document a credible explanation for why the customer is sending money to the high-risk jurisdiction
- Senior management approval: the decision to establish or continue a business relationship involving a high-risk jurisdiction must be approved by senior management
- Enhanced ongoing monitoring: transactions involving high-risk jurisdictions should be subject to more frequent and intensive monitoring than standard-risk business
Managing Correspondent Banking Relationships
One of the most significant practical challenges for MSBs is maintaining banking relationships. Over the past decade, major UK banks have significantly reduced their exposure to the MSB sector: a process known as "de-risking." Banks cite the high money-laundering risk associated with MSBs, particularly those operating corridors to high-risk jurisdictions, as the primary reason for account closures.
To maintain banking relationships, MSBs should:
- Demonstrate strong AML controls: provide your banking partner with copies of your BWRA, AML policies, most recent compliance monitoring report and SAR filing statistics
- Be transparent about your business model: banks are more likely to maintain relationships with MSBs that provide clear, accurate information about their customer base, transaction volumes and geographic corridors
- Engage proactively: do not wait for your bank to request information. Provide regular updates on your compliance programme and any material changes to your business
- Diversify banking relationships: reliance on a single banking partner creates existential risk. Consider establishing relationships with multiple banks or exploring partnerships with e-money institutions as alternative settlement channels
- Know the regulators' position: the FCA has said publicly that banks should assess MSB customers individually rather than exit whole sectors. If a bank is closing your account, ask for its reasons and keep a record
Supervisory Expectations
HMRC supervises most MSBs for AML, and the FCA supervises authorised payment institutions and EMIs. Money transmitters also need FCA payment permission as an authorised payment institution or small payment institution. Supervisory approaches to MSBs with high-risk jurisdiction exposure include:
Thematic reviews: Supervisors periodically conduct sector-wide reviews of MSB AML compliance. Firms selected for review should expect detailed information requests covering transaction data, CDD samples and risk assessment documentation.
Risk-based supervision: MSBs are categorised by their supervisor based on their inherent risk profile. Firms with significant high-risk jurisdiction exposure, high cash volumes or a history of compliance concerns are classified as higher risk and receive more intensive supervisory attention, including more frequent reporting requirements and potential on-site visits.
Skilled person reports: Where the FCA has concerns about an FCA-authorised firm's AML controls, it may commission a skilled person report under section 166 of FSMA 2000. The cost of the report is borne by the firm. Skilled person reports typically involve a detailed assessment of the firm's AML framework by an independent compliance consultancy.
Practical Compliance Strategies
Map your corridors. Create a comprehensive map of every remittance corridor you operate, with risk ratings for each destination country based on FATF status, sanctions exposure and your own operational experience. Review and update this map quarterly.
Apply a corridor-specific risk framework. Generic EDD procedures applied uniformly across all high-risk corridors are unlikely to satisfy the FCA. Tailor your EDD measures to the specific risks of each corridor. For example, a Somalia remittance corridor raises different risk indicators than a corridor to Russia or Pakistan.
Invest in staff training on geographic risk. Front-line staff must understand which jurisdictions are high-risk, what additional questions to ask customers sending to those jurisdictions and when to escalate concerns. Scenario-based training using real transaction examples is more effective than generic e-learning.
Maintain comprehensive records. For every transaction involving a high-risk jurisdiction, retain records of the CDD conducted, the source of funds evidence obtained, the rationale for proceeding with the transaction and any senior management approval. These records are the primary evidence the FCA will review during supervisory assessments.
Engage with industry bodies. Trade associations for payments and remittance firms can provide sector-specific guidance, facilitate dialogue with banks and represent MSB interests in regulatory consultations.
Regulatory Outlook
Three changes in 2026 matter most for MSBs with high-risk corridors:
- The Money Laundering and Terrorist Financing (Amendment) Regulations 2026, in force from 30 June 2026, limit mandatory EDD to the FATF call for action list and keep grey-list countries as a risk factor
- The UK Sanctions List became the single source of UK designations on 28 January 2026
- The FATF's June 2026 plenary changed the grey list, and the next plenary may change it again
MSBs should review corridor risk ratings after each FATF plenary and record why each corridor is rated as it is.
Frequently asked questions
The FATF black list (formally "High-Risk Jurisdictions Subject to a Call for Action") identifies countries with serious strategic AML/CFT deficiencies: currently Iran, North Korea and Myanmar. The grey list (formally "Jurisdictions Under Increased Monitoring") identifies countries working with the FATF to address identified weaknesses. Since 30 June 2026, UK law makes EDD mandatory for black-list countries; grey-list countries are a risk factor that firms must weigh.
It depends on the sanctions regime. Comprehensive sanctions (e.g., against North Korea) effectively prohibit most transactions. Targeted sanctions may allow some transactions provided they do not involve designated persons or entities. MSBs must screen all transactions against the UK Sanctions List and obtain specialist legal advice before operating corridors to sanctioned jurisdictions.
Banks cite money-laundering risk as the primary reason for de-risking MSBs. The regulatory cost of monitoring MSB accounts, combined with the potential for significant fines if an MSB client is used for money laundering, has led many banks to conclude the commercial risk outweighs the reward. The FCA has said publicly that banks should assess MSB customers individually rather than exit the sector as a whole.
No longer automatically. Since 30 June 2026, mandatory EDD under regulation 33 applies to countries on the FATF call for action list. Grey-list countries remain a geographic risk factor that firms must weigh, and EDD still applies where the risk assessment shows higher risk.
No. Schedule 3ZA was removed in January 2024. The MLRs now refer directly to the FATF lists as they change, so firms should check the FATF website after every plenary.
Definitive guides on this topic
The permanent reference pages this article relates to.