Key Aspect of AML Directive: Business Relationships and Transactions with High-Risk Third Countries

C

The EU's AML Directive aims to prevent money laundering and terrorist financing in the European Union. One key aspect of the directive relates to the risks associated with business relationships and transactions with high-risk third countries.

Answer A is incorrect because the AML Directive requires obliged entities to implement external audit requirements for branches and subsidiaries located in high-risk countries, rather than just considering such requirements voluntarily.

Answer B is also incorrect because the AML Directive requires obliged entities to apply measures for enhanced due diligence, which are prescribed at the EU level rather than determined by member state regulations.

Answer D is incorrect because obliged entities must take specific circumstances into account when performing enhanced due diligence measures.

The correct answer is C. Obliged entities should implement additional mitigating measures complementary to the enhanced customer due diligence procedures, in accordance with a risk-based approach. This means that when dealing with high-risk third countries, obliged entities should consider additional measures beyond the standard due diligence procedures, based on a risk assessment of the specific circumstances of the relationship or transaction. These additional measures may include, for example, obtaining additional information or documentation, conducting more frequent monitoring, or applying additional internal controls. The goal is to ensure that the obliged entities have a thorough understanding of the risk associated with a particular transaction or relationship, and to mitigate that risk appropriately.