The European Commission on Wednesday proposed adding seven countries including Saudi Arabia to the European Union's (EU) money-laundering blacklist of governments that do too little to thwart the financing of terrorism and organised crime.

The new countries targeted by the commission, including Saudi Arabia and Panama, would join another 16 already on this register — such as Pakistan, Iran, Iraq, Ethiopia and North Korea. The EU list is mostly based on criteria used by the Financial Action Task Force (FATF), a global body composed by wealthy nations meant to combat money laundering and terrorism financing.

A press release issued by the commission read: "The Commission concluded that 23 countries have strategic deficiencies in their anti-money laundering/ counter-terrorist financing regimes. This includes 12 countries listed by the Financial Action Task Force and 11 additional jurisdictions. Some of the countries listed today are already on the current EU list, which includes 16 countries."

Read more: Pakistan on FATF’s grey list: what, why, and why now?

The move comes as tensions between Riyadh and European capitals are heightened over the murder last year of the columnist Jamal Khashoggi at the Saudi consulate in Istanbul.

Khashoggi, a columnist for the Washington Post and a critic of Crown Prince Mohammed bin Salman, was killed and dismembered by Saudi agents at its Istanbul consulate on Oct 2, 2018, provoking widespread revulsion and damaging the kingdom’s image.

The proposal must now be approved by the European Parliament and the 28 member states, with France and Britain against the new list.

Inclusion on the list does not trigger sanctions, but it does oblige European banks to apply tighter controls on transactions with customers and institutions in those countries.

"We have put in place the highest standards in the world in the fight against money laundering," said European Commissioner for Justice Vera Jourova.

"But we must ensure that dirty money from other countries does not end up in our financial system," she told a press conference at the European Parliament plenary session in Strasbourg.

"Dirty money is the driving force behind organised crime and terrorism," Jourova continued, urging countries on the list to "quickly remedy their shortcomings".

A diplomat said objections to the new list were not linked to fallout from the Khashoggi murder and a desire to appease Saudi Arabia.

There isn't "an opposition to the addition of a particular country", but concerns over the "methodology" used, they said.

MEP Eva Joly, a former investigating judge, welcomed the new list but suggested the commission "publish the country assessments in order to increase the transparency of the process and avoid accusations of political bargaining."

European countries such as Cyprus or the United Kingdom should also be on the list, she said.

Countries are blacklisted if they “have strategic deficiencies in their anti-money laundering and countering the financing of terrorism regimes that pose significant threats to the financial system of the Union”, the existing EU list says.

Under the new EU methodology, jurisdictions could also be blacklisted if they do not provide sufficient information on ownership of companies or if their rules on reporting suspicious transactions or monitoring financial customers are considered too lax.