Risky banking operations by country

Actualizado: 21 jun 2021

Due to companies’ growing need to expand their borders on the commercial side, we face the challenge of operating with new and different ways of banking. Differences may lead to increased operational risk.

First, we must understand the concept of operational risk. It refers to the risk that may result in losses as a result of human error, inadequate or defective internal processes, system failures and external events. This definition includes legal risk and excludes strategic and/or business risk and reputational risk.

All activities, products, systems and processes involve an inherent operational risk stemming from various places (processes, internal and external fraud, technology, human resources, business practices, natural disasters, suppliers, etc.).

In this context, we find countries that represent a high risk for financial institutions and thus, for companies that choose to work with them. Banks from these countries are usually regarded as subject to suspicion for supporting international terrorism and/or having money laundering jurisdictions. They are therefore subject to special measures.

Some jurisdictions may even hinder businesses from moving money out of the country or have strict foreign exchange policies. Business leaders should be aware of what jurisdictions have been classified as high risk or non-cooperative and consider this information when selecting their markets.

As part of international actions in the fight against money laundering and terrorist financing, the Financial Action Task Force (FATF) undertakes a continuous process of identifying countries that have not implemented the preventive measures required to protect the integrity of their financial sector.


Necessary documentation to operate in high-risk countries

Payments from countries considered high-risk must pass through Risk Jurisdiction control (audit). To pass this control, companies must submit documentary information on the source of funds (invoice) and the payment plan, since the invoice and deposit must match.

The documents that beneficiaries may have to provide for typical business transactions are as follows:

  • Invoice issued by the transferee where the payer appears as importer (debtor of the commercial operation).

  • Invoice issued by the beneficiary where the payer is listed as service recipient. The service delivery contract between the beneficiary and the payer of the transfer can be presented as proof.

  • Real estate sales: public deeds of sale as a source of funds.

  • Collection of dividends: accounting information of the company and actual owners.

  • Capital contributions: notarised documents of the transaction and shareholder certificates.

  • Acceptance of inheritance: notarised documents proving acceptance of inheritance, deeds of inherited property sales, etc.

  • In the case of export of goods: the goods dispatch document must be included (transport document).

Countries blacklisted by the FATF (2015)

In its last plenary meeting, held in Paris in February 2015, the FATF approved the inclusion of the following non-cooperative countries in the Public Statement list, in the following categories:

1. Do not apply effective measures to protect their financial sectors against inherent risks:Iran and Korea.

2. Strategic deficiencies and not making sufficient progress in the action plan to address them: Algeria -Ecuador - Myanmar.

3. The global compliance improvement list, which currently includes 11 countries with strategic deficiencies that are subject to an Action Plan: Afghanistan, Angola, Guyana, Indonesia, Iraq, Laos, Panama, Papua New Guinea, Sudan, Syria and Yemen.

4. They are not making sufficient progress in the Action Plan agreed with the FATF. If they make no significant progress in the same, they may be identified as non-compliant and be subject to measures in addition to those of the previous group. -Uganda.

5. Countries who have complied with the plan of action after being visited by a FATF evaluation team, whose report states that they have successfully fulfilled their respective action plans and are not subject to the FATF monitoring process: Albania, Cambodia, Kuwait, Namibia, Nicaragua, Pakistan and Zimbabwe.

In short, considering all the above, a good back office service should anticipate and adapt to customers’ various needs, being well aware of their operation in order to provide an appropriate service and guidance in each case. FI you would like to learn more contact us at marketing@ivc.es.

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