HM Treasury, which is the managing department for money laundering, terrorist financing and financial sanctions (but not trade embargoes) says "The Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 require the UK regulated sector to apply enhanced customer due diligence in relation to high-risk third countries."
The new Regulations refine the definition of "high risk third countries." What it actually does is to simplify the process.
The Financial Action Task Force (made up of representatives of Treasury departments from its members) issues its lists. In a pretence at independence, the European Union issues a list which, under Directives, becomes enforceable across the EU.
That can, often, take some time.
Now that the UK is no longer part of the EU and that, for some purposes, it is free of the Directives, the UK can short-circuit that process and directly import into the UK's own regulatory framework the FATF's black- and -grey lists.
The system was: the FATF published a list and/or updates to it
The EU republished that list and any updates
Because it is a Directive (not as the EU is now moving towards, a "Regulation") member states were bound to implement it.
Member states published the list and any updates under local law.
That often took a week or more. There may be disputes as to which countries should be included. Some method was needed to truncate that - and to reduce the bureaucratic burden. How much simpler to say "regulated businesses must regard the FATF as the relevant source."
So that is what this aspect of the 2024 Regulations does.
But, any and all businesses that are regulated in the UK should, if properly advised and managed, have already been bypassing the EU's system and using the FATF's list as a factor in its risk assessments.
There was a lacuna: if a transaction were blocked because the institution relied on the FATF's list before the EU published its list and (because this is how it worked) the UK published its own list could a customer claim that the bank, etc. acted in bad faith? The 2024 Regulations protect those financial institutions that were already efficient. They also remove a tedious task from administration by the government.
This is not sanctions: it's the FATF's naughty step.
Listed countries were, according to the Treasury, "previously defined for the purposes of the Regulations as a country specified in Schedule 3ZA to the Regulations. Government policy has been that this schedule should align with lists published by the Financial Action Task Force (FATF) of ‘Jurisdictions Under Increased Monitoring’ and ‘High-Risk Jurisdictions subject to a Call for Action’."
It goes on "In order to keep abreast of which countries are HRTCs, relevant persons will now have to refer directly to lists published by the Financial Action Task Force (‘FATF’) of ‘Jurisdictions Under Increased Monitoring’ and ‘High-Risk Jurisdictions subject to a Call for Action’. These lists are updated three times a year, on the final day of each FATF Plenary meeting, held every February, June and October. "
HM Treasury's full explanatory note is here: https://www.gov.uk/government/publications/money-laundering-advisory-no…
It does not include a link to the Regulations, a draft of which, published on the day millions of people in the UK started their Christmas / New Year break is here: https://www.legislation.gov.uk/uksi/2023/1306/pdfs/uksi_20231306_en.pdf