The EU’s Defiantly Discriminatory & Disproportionate Action Persists

What a hectic year this has been for Europeans! On October 1st 2020, the European Union (EU) confirmed the list of jurisdictions which “pose significant threats to the financial system of the Union (‘high-risk third countries’)…identified as having strategic deficiencies in their AML/CFT regimes” such as Afghanistan, The Bahamas, Barbados, Botswana, Cambodia, Democratic People’s Republic of Korea (DPRK), Ghana, Iran, Iraq, Jamaica, Mauritius, Mongolia, Myanmar/Burma, Nicaragua, Pakistan, Panama, Syria, Trinidad & Tobago, Uganda, Vanuatu, Yemen, and Zimbabwe. Then on October 7th, the EU published its list of “non-EU countries that encourage abusive tax practices, which erode member states’ corporate tax revenues” as American Samoa, Anguilla, Barbados, Fiji, Guam, Palau, Panama, Samoa, Trinidad & Tobago, US Virgin Islands, Vanuatu, and Seychelles. The Cayman Islands were able to secure their escape from this list — for now.

The communiqué following the recent 41st Regular Meeting of CARICOM Heads of Government stated “Heads of Government observed that the EU…have stepped up the economic assault on Small States…condemned in the strongest possible terms the continued blacklisting…through unilaterally and arbitrarily determined standards, and in the absence of any meaningful prior consultation…this disproportionate treatment of CARICOM States is a breach of the rights of CARICOM citizens, and called upon the European Council and European Commission to desist from this egregious practice.”

The fact that ALL of these countries have been colonized or otherwise occupied by Europeans, and that not one of them is predominantly white — which is quite a statistical achievement in itself — was discussed on a lively podcast with the outstanding Irish economist David McWilliams. This injustice captured the attention of certain Members of the European Parliament, to the extent that Ms. Clare Daly posed a formal question to the European Parliament as follows: “The EU’s AML/CFT blacklist system has been criticised as racist and as ‘a clear manifestation of Europeans’ longstanding penchant for domination, exploitation, and brutality.’ It has been criticised for the glaring omission of predominantly white, non-EU jurisdictions such as Gibraltar, Russia, and the USA, which are well known as money-laundering hotspots, and for the disproportionate inclusion of economically weak, non-white countries whose level of economic activity (including money laundering) is insignificant relative to that of EU Member States and other omitted countries.

  1. Can the Commission address these criticisms and account for the fact that the EU’s AML/CFT blacklist is predominantly made up of non-white countries in the Global South?

2. Is it concerned that the penalties imposed as a consequence of blacklisting have the potential to damage irreparably the economies of blacklisted countries, particularly in light of the fact that most of the states blacklisted are economically weak to start with?

Not only did the European Parliament’s response ignore the allegations of discrimination against ‘non-white countries in the Global South,’ it either naively or dishonestly stated “The inclusion in the EU list does not entail any sanctions: the principal consequence of the listing is that obliged entities in the Member States are bound to apply enhanced ‘know your customer’ checks to business relationships or transactions involving high-risk third countries.” Could the EU not know that the enhanced due diligence they impose has direct negative reputational, cost, and efficiency implications?

Watch this space for a thorough analysis of and reply to the EU Parliament’s response to Ms. Clare Daly’s question.

Economist and leading advisor on the Caribbean

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