The British Overseas Territory has put in significant effort to restore its global financial center status after concerns about transparency. In February 2024, the European Commission removed Gibraltar from its list of high-risk third countries with “strategic deficiencies” in its anti-money laundering and countering the financing of terrorism (AML/CFT) regimes. This redesignation came into force last week and was aligned with Article 9(2) of the Fourth Anti-Money Laundering Directive. This action marked the culmination of efforts by Gibraltar to strengthen its financial controls and address the concerns raised by the Financial Action Task Force (FATF).
The Fourth Anti-Money Laundering Directive, adopted by the EU in 2017, establishes a legal framework for preventing and combating money laundering and terrorist financing. Article 9(2) of the Directive empowers the European Commission to identify high-risk third countries based on deficiencies identified by FATF, the global standard-setter for AML/CFT. Inclusion on this list can have disastrous repercussions for a jurisdiction, potentially hindering financial transactions and discouraging investment.
In December 2017, the EU added Gibraltar to its high-risk list due to concerns regarding its AML/CFT framework. Though not formally blacklisted, this designation raised questions about the British Overseas Territory’s financial transparency and compliance after FATF had previously identified areas for improvement in Gibraltar’s AML/CFT regime, placing it on its ‘grey list’ of jurisdictions under increased monitoring in 2017. At the time, Gibraltar’s government vehemently contested the EU’s decision, arguing that it had already implemented significant reforms to address FATF’s concerns. These reforms included enhanced customer due diligence, involving stricter verification of clients’ identity and source of wealth when seeking financial services in Gibraltar; improved risk assessment procedures, with financial institutions required to conduct more thorough risk assessments of their clients and transactions to identify potential money laundering or terrorist financing activities; and strengthened cooperation with law enforcement agencies, with positive steps taken to collaborate more closely with international partners to share information and combat cross-border financial crime.
After implementing these reforms, Gibraltar actively collaborated with the FATF and addressed all outstanding issues. Last month, the authority recognized Gibraltar as a compliant jurisdiction. Following this, the European Commission promptly decided to remove the territory from its high-risk list. This new designation is expected to enhance investor confidence in Gibraltar as a reputable financial center. Furthermore, removal from the list will alleviate bureaucratic burdens for financial transactions involving Gibraltar-based institutions.
In response to the news, the Gibraltar government issued a brief statement, describing the development as “another validation of Gibraltar’s position as a reputable and trustworthy jurisdiction.”
Lucy Keane, counsel with Signature Litigation and qualified as a barrister in Gibraltar last year, provided further insight, stating in an email to CDR: “The European Commission’s decision to remove Gibraltar from its list of high-risk countries is a testament to the hard work put in by many in Gibraltar over the last couple of years, not least HM Government of Gibraltar and the Gibraltar Financial Services Commission (GFSC). Their determination to restore Gibraltar to its rightful place as a global financial center has paid off, and a collective cheer could be heard in Gibraltar on the day that the FATF removed the British Overseas Territory from its grey list.”
Keane continued: “Gibraltar has a vibrant and competitive financial services sector covering insurance, trusts, crypto, and funds. Unlike other offshore financial centers, Gibraltar offers financial passporting rights into the UK. With its continental location and low tax regime, this makes Gibraltar a very attractive destination for financial services companies. There is no doubt that this was clouded by Gibraltar’s grey listing, but now that the Territory is back on the White List of not just the FATF, but also the UK and the European Commission, a real sense of optimism and energy is back on the Rock and the future looks rosy.”
