Which Countries Are on the FATF Blacklist and Grey List?
The Financial Action Task Force (FATF) plays a big role in keeping the global financial system safe. As an independent organisation, it works internationally to prevent financial crimes like money laundering and terrorism financing. To do this, it sets recommendations for governments to build a robust AML compliance framework and improve regulations. When a country fails to cooperate, it gets blacklisted, signaling serious weaknesses in tackling issues like the proliferation of weapons, corruption, and illegal financing. Meanwhile, the grey list includes countries that don’t fully meet compliance standards but are making a sturdy effort toward improvement. These lists are issued based on an efficient evaluation process, ensuring that non-compliant countries face the right pressure to act. The Task Force’s actions help protect against mass destruction, fraud, and other risks that could shake the international financial system.
Understanding the FATF Blacklist and Grey List
The FATF uses two important lists: the blacklist and the greylist. Countries on the blacklist aren’t meeting the required AML/CFT and CPF standards, which means they’re not doing enough to prevent things like money laundering, terrorism financing, and the spread of weapons. These countries often have serious deficiencies and shortcomings in their systems. The greylist, on the other hand, includes countries that have started putting AML/CFT and CPF regimes in place but still need to work on fixing some of the shortcomings. They’re in a work-in-progress phase, aiming to improve and eventually meet all the standards to be fully standardised and avoid the risk of getting blacklisted.
FATF Blacklist 2024 – Latest Update (October 2024)
What Does the FATF Blacklist Mean?
The FATF blacklist includes countries that are non-compliant with AML standards and pose a risk due to insufficient frameworks in place to combat financial crimes like terrorism financing and money laundering. These countries, such as Iran, Myanmar, and the Democratic Republic of North Korea, are subject to sanctions and are considered high risk. Their non-cooperation with global efforts to prevent fraud and proliferation makes them a serious concern. The FATF regularly monitors and assesses these countries, looking at their compliance and efforts to improve. Delisting can occur if they meet FATF’s criteria and show effective steps to resolve their issues, but until then, the risk of doing business with them remains high, potentially jeopardizing the economic systems of other countries.
FATF Grey List 2024 – Latest Update (October 2024)
What Does the FATF Grey List Mean?
The FATF grey list includes countries like Algeria, Angola, Lebanon, and Côte d’Ivoire that are under increased monitoring due to insufficient AML and compliance frameworks. These countries are not as risky as those on the blacklist, but their AML systems are still not fully compliant with FATF standards. FATF assesses performance regularly and monitors their progress toward improvement. The grey list serves as a warning, showing that these countries are working to improve but still have shortcomings in their compliance. De-listings and additions happen based on the analysis and monitoring of their efforts. For example, Senegal was removed, while Venezuela, Monaco, and UAE were added in February and June updates. The FATF updates the list three times a year, and countries must continue improving to avoid non-cooperation with global AML efforts and to eventually meet FATF’s criteria.
Understanding the Difference Between FATF Blacklisted and Greylisted Countries
The FATF blacklisted countries are those that have strategic deficiencies in combating money laundering, terrorist financing, and proliferation financing. These jurisdictions are subject to enhanced due diligence and sanctions to protect the global financial system from the risks posed by these issues. Their failure to address strategic deficiencies puts them at risk of damaging the global financial infrastructure.
In contrast, greylisted jurisdictions are working closely with the FATF to improve their regimes and address identified issues. These countries are committed to resolving their strategic deficiencies within timeframes and are under increased monitoring. While they are not fully compliant yet, they show progress and are working towards countering financial crimes effectively to meet FATF standards.
How Many Countries Are Included in the FATF?
As of 27th October 2023, the FATF consists of 40 members and works with 9 FSRBs. Over 200 jurisdictions around the world are committed to FATF recommendations through the global network and FATF-Style Regional Bodies. Indonesia is the latest addition to the FATF membership.
Consequences of FATF Blacklisting a Country
When a country is blacklisted by the FATF, it faces significant sanctions and restrictive measures from international bodies. These actions make it difficult for the blacklisted country to secure funds or attract foreign exchange inflows. Global financial institutions may refuse to do business with them, leading to a negative impact on the economy. International trade becomes costly, and the banking system might struggle to survive due to declining trade and financial activities.
Reasons Behind North Korea’s Blacklisting by the Financial Action Task Force (FATF)
The DPRK is blacklisted by the FATF because it has failed to address deficiencies in its money-laundering and terrorist financing (AML/CFT) frameworks. The country poses serious threats to the global financial system through illicit activities, including the financing of the proliferation of weapons of mass destruction (WMDs). These activities have raised serious concerns about its impact on the integrity of the financial system, leading to its blacklisting due to the failure to address these issues.
Is Russia Blacklisted by FATF?
As of February 2024, Russia is not on the FATF blacklist or the grey list. Instead, the Russian Federation’s membership has been suspended. Countries are asked to remain vigilant about emerging risks and apply necessary measures to mitigate them.
FATF Grey List, Blacklist, and AML Regulations
When businesses assess risks with jurisdictions, they refer to the FATF Blacklist and Grey List. Regulated entities adopt a risk-based approach to determine if a customer fits their risk appetite. These jurisdictions may face increased monitoring and are subject to review 3 times a year under AML regulations.
Are Countries on the FATF Grey List Considered High Risk?
Countries on the FATF grey list often have a strategic deficiency in their AML/CFT regime. Based on a risk-based approach, these countries are treated as high-risk, depending on the entity assessing the situation.
Are Countries on the FATF Blacklist Considered High Risk?
Countries on the FATF blacklist are considered high-risk for activities like money laundering, terrorist financing, and proliferation financing.
FATF Blacklist and Grey List – Screening and Monitoring Process
Financial institutions and non-financial businesses, including virtual asset service providers, must regularly monitor their customer databases for suspicious transactions. By screening against the FATF Blacklist and Grey list, they can identify non-cooperative countries and avoid engaging with those that could expose them to financial losses, reputational damage, or risks associated with money laundering and terrorism financing.
Effective AML compliance includes performing identity verification, Customer Due Diligence, and Enhanced Due Diligence processes, regularly updating them, and screening against sanction lists. Financial institutions contribute to strengthening the fight against these crimes by promptly reporting suspicious accounts and submitting SARs to the authorities. This helps mitigate risks and ensures compliance with AML laws and regulations in the UAE and beyond.
FAQ’S
Q1: What is the FATF blacklist?
The FATF blacklist includes countries that fail to meet anti-money laundering (AML) and counter-financing of terrorism (CFT) standards. These countries face sanctions and are closely monitored for posing risks to the global financial system.
Q2: Are countries on the FATF blacklist considered high-risk?
Yes, countries on the FATF blacklist are considered high-risk. They are linked to money laundering, terrorist financing, and other illegal activities due to weaknesses in their AML/CFT regulations.
Q3: How is the FATF grey list different from the blacklist?
Countries on the FATF grey list are monitored closely. They are making efforts to improve their AML/CFT systems. However, they haven’t yet reached full compliance, unlike countries on the blacklist.
Q4: What happens to businesses dealing with blacklisted countries?
Businesses engaging with blacklisted countries risk financial losses and damage to their reputation. They may also face penalties for being involved in money laundering or terrorism financing.
Q5: How can businesses avoid risks from blacklisted countries?
To avoid risks, businesses should regularly check their customer databases against the FATF blacklist and grey list. They should also maintain strong due diligence to comply with AML regulations.
Q6: How often does FATF review countries on its blacklist and grey list?
FATF reviews the status of countries on the blacklist and grey list about three times a year. Changes depend on how well countries address their AML/CFT deficiencies and other risks.