FATF Greylists and Blacklists
The Financial Action Task Force is an inter-governmental body working towards the prevention of financial crime globally. Although it does not enforce regulations or impose penalties, the FATF recommendations and guidelines play a key role in assisting financial organizations to mitigate money laundering and combating terrorist funding. The FATF also identifies countries lacking a proper financial infrastructure to prevent corruption and other financial crime.
What is the FATF Blacklist?
The FATF Blacklist is a collection of countries that the financial watchdog declares as “non-cooperative” in efforts to address money laundering and terrorist financing concerns. Often called an OECD blacklist, it is used to encourage countries to take necessary measures to improve their regulatory standards. FATF blacklist helps identify financial loopholes that hinder AML/CFT compliance within an organization. Failure to complete the required action points in time results in FATF placing a ‘country under increased monitoring’ on the blacklist.
What is the “Call for Action” Rule?
The FATF blacklist maintains a record of high-risk countries defined in High-risk Jurisdictions subject to a Call for Action. These territories are considered less tactful in contributing to global CFT/AML efforts and pose a greater risk to financial institutions. The purpose of the FATF blacklist is two-fold:
(i) Highlight the negative reputation of high-risk countries so that financial organizations can perform background checks before associating ties with customer/partner entities from these regions
(ii) Address the risk of money laundering a particular jurisdiction poses to the global financial system.
Usually, FATF member states and businesses operating in these countries impose certain sanctions and restrictions on blacklisted countries. The blacklist is an official document frequently updated based on findings related to financial crime and its prevention. Keeping in view the regulatory criteria, FATF may include or withdraw a country from the blacklist depending upon the financial infrastructure in the particular region.
Currently, there are only two countries on the FATF blacklist, Iran and North Korea, because of the state of illicit activities related to terrorism and nuclear weapons there.
What is the FATF Greylist?
Jurisdictions Under Increased Monitoring – also referred to as the FATF greylist – consists of countries having “strategic deficiencies” in combating financial crime. Countries listed on the FATF greylist represent a high risk of money laundering and terrorist financing but are officially committed to making the regulatory infrastructure better to prevent financial crime. These efforts include
- Creating an action plan to address the need for AML/CFT measures across the country
- Developing a central regulatory unit that works with other financial entities and businesses to combat the illicit flow of money
- Effective implementation of Anti Money Laundering standards
Apart from the efforts, greylisted countries are under increased monitoring by the FATF itself or by other regional bodies designated by the FATF. These entities report a country’s progress towards meeting AML/CFT compliance. Even though greylist countries represent a lower risk than blacklisted jurisdictions, the World Bank and other financial organizations may place certain sanctions.
Countries Greylisted by the FATF
Similar to the blacklist, the FATF greylist is regularly updated keeping in view the condition of financial crime in a particular country. In 2020, almost 18 countries were included in FATF greylist: Zimbabwe, The Bahamas, Pakistan, Cambodia, Ghana, Jamaica, Mauritius, Botswana, Panama, Syria, Myanmar, Uganda, Albania, Yemen, Barbados, and Nicaragua
2021 Updates to the FATF Greylist
The FATF greylist as per February 2021 includes 19 jurisdictions.
Maintained Countries: Zimbabwe, Pakistan, Cambodia, Ghana, Jamaica, Mauritius, Botswana, Panama, Syria, Myanmar, Uganda, Albania, Yemen, Barbados, Cambodia
Countries Excluded: The Bahamas
Countries Added: Burkina Faso, Morocco, Cayman Islands, Senegal
A country exists the FATF greylist as soon as they complete the action plan and all regulatory requirements for combating financial crime are addressed.
What are the FATF-style Regional Bodies?
The FATF-style Regional Bodies (FSRBs) are entities operating as part of the FATF’s global network for financial crime prevention. Currently, there are nine regional bodies operating in different jurisdictions that help the FATF in updating the blacklist and greylist.
|Sr no||Name of the FSRB||Operational Jurisdictions|
|1||Asia/Pacific Group of Money Laundering (APG)||Afghanistan, Australia, Bangladesh, Bhutan, Brunei Darussalam, Cambodia, Canada, China, Chinese Taipei, Cook Islands, Fiji, Hong Kong, India, Indonesia, Japan, Korea, Lao People’s Democratic Republic, Macao, Maldives, Marshall Islands, Mongolia, Myanmar, Nauru, Nepal, New Zealand, Niue, Pakistan, Palau, Papua New Guinea, Philippines, Samoa, Singapore, Solomon Islands, Sri Lanka, Thailand, Timor Leste, Tonga, US, Vanuatu, Vietnam|
|2||MONEYVAL - Council of Europe Anti-money Laundering Group||Albania, Andorra, Armenia, Azerbaijan, Bosnia & Herzegovina, Bulgaria, Croatia, Cyprus, Czech Republic, Estonia, Georgia, Gibraltar, Guernsey, Holy See, Hungary, Isle of Man, Israel, Jersey, Latvia, Liechtenstein, Lithuania, Malta, Moldova, Monaco, Montenegro, Poland, Republic of North Macedonia, Romania, Russian Federation, San Marino, Serbia, Slovak Republic, Slovenia|
|3||The Eurasian Group (EAG)||Belarus, China, India, Kazakhstan, Kyrgyzstan, Russian Federation, Tajikistan, Turkmenistan, Uzbekistan.|
|4||Middle East and North Africa Financial Action Task Force (MENAFATF)||Algeria, Bahrain, Djibouti, Egypt, Iraq, Jordan, Kuwait, Lebanon, Libya, Mauritania, Morocco, Oman, Palestinian Authority, Qatar, Saudi Arabia, Somalia, Sudan, Syria, Tunisia, UAE, Yemen.|
|5||Caribbean Financial Action Task Force (CFATF)||Anguilla, Antigua & Barbuda, Aruba Kingdom of the Netherlands, Bahamas, Barbados, Belize, Bermuda, Cayman Islands, Curaçao Kingdom of the Netherlands, Dominica, El Salvador, Grenada, Guyana, Haiti, Jamaica, Montserrat, Saint Vincent & the Grenadines, Sint Maarten Kingdom of the Netherlands, Suriname, Trinidad & Tobago, Turks and Caicos Islands, Venezuela, Virgin Islands (UK).|
|6||Central Africa Anti-Money Laundering Group (GABAC)||Cameroon, Central African Republic, Chad, Congo, Democratic Republic of Congo, Equatorial Guinea, Gabon.|
|7||West Africa Money Laundering Group (GIABA)||Cameroon, Central African Republic, Chad, Congo, Democratic Republic of Congo, Equatorial Guinea, Gabon.|
|8||Eastern and South Africa Anti-Money- Laundering Group (ESAAMLG)||Angola, Botswana, Eswatini, Ethiopia, Kenya, Lesotho, Madagascar, Malawi, Mauritius, Mozambique, Namibia, Rwanda, Seychelles, South Africa, Tanzania, Uganda, Zambia, Zimbabwe.|
|9||Latin America Anti-Money Laundering Group (GAFILAT)||Argentina, Bolivia, Brazil, Chile, Colombia, Costa Rica, Cuba, Dominican Republic, Ecuador, Guatemala, Honduras, Mexico, Nicaragua, Panama, Paraguay, Peru, Uruguay.|
The FATF itself operates in these countries as well: Argentina, Australia, Austria, Belgium, Brazil, Canada, China, Denmark, Finland, France, Germany, Greece, Hong Kong, Iceland, India, Ireland, Israel, Italy, Japan, Korea, Luxembourg, Malaysia, Mexico, New Zealand, Norway, Portugal, Russian Federation, Saudi Arabia, Singapore, South Africa, Sweden, Switzerland, Turkey, UK, and the US.
How do These Lists Help in AML Screening?
Corporate entities need to perform Customer Due Diligence checks to initiate ties with legitimate customers and business partners. To ensure across-the-board regulatory compliance and to screen potentially high-risk customers, background checks are essential. A risk-based AML approach incorporates FATF greylist and blacklist screening that helps enterprises create a risk profile of the customer which is later used for ongoing transaction monitoring.
Ongoing AML of these high-risk entities allows firms to detect unusual transactions, create a Suspicious Activity Report (SAR) and share with global regulators to help combat financial crime at scale.
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