What are FATF Blacklist and Grey list countries?
The Financial Action Task Force (FATF) is an independent agency that works internationally to prevent money laundering and financing. It provides several recommendations for governments that help them to make their AML compliance framework sturdy and robust. FATF has issued a blacklist which is also known as the OECD list. This backlist mentions the names of the countries which do not cooperate in the global efforts to prevent financial crimes such as money laundering, financing of terrorism, and financing of proliferation of weapons for mass destruction.
While the other list issued is the grey list of countries where the AML regulations are not entirely compelling and efficient enough to counter money laundering and terrorism financing.
About the FATF Blacklist and Grey list
FATF Blacklist
The FATF Blacklist enlists the countries that do not have an efficient AML system or instead do not intend to control financial crimes. Their trade activities are not guided to prevent money laundering, financing of terrorism, or proliferation financing. Their AML frameworks are insufficient to deal with the global threat of money laundering. Their trade activities also put other countries at risk of financial fraud and jeopardized their economic system.
The FATF blacklist is officially known as High-Risk Jurisdictions subject to a Call for Action, which acts as a deterrent for countries doing business with the listed countries because of their non-cooperation in the global fight against financial crimes. The FATF blacklist makes other countries aware of the status of the blacklisted country, and they know that doing business with such a country or person hailing from these countries would be dangerous for their economy and the global economy.
With the FATF blacklist, the countries know which countries they need to put on the sanction lists, which helps their business organizations understand which countries they should not do business with. When FATF has deemed the blacklisted countries insufficient, other countries should cut off ties with the blacklisted countries until they improve their AML frameworks and satisfy the FATF criteria of being AML compliant, sufficient enough to remove their name from the FATF blacklist.
Please note that the FATF updates the blacklist annually or sometimes biannually, so businesses must continuously check them for new listing and delisting. The number of countries on the blacklist varies depending on the effectiveness of the AML compliance framework – if the blacklisted countries have improved their AML efforts to curb the evils of financial crimes. The FATF analyze the same and makes an informed decision about their continued listing or delisting. The FATF continuously monitors the country’s contribution and efforts to check on financial crimes and gathers reliable information on which the listing process is based.
As FATF does not have direct powers to ban a country from conducting business with other countries, its issuance of a blacklist is a recommendation to other countries dealing with a blacklisted country – not to continue such trade as it will put their business and the country’s financial system at risk.
At present, only the Democratic Republic of North Korea and Iran are mentioned in the FATF blacklist.
FATF Grey list
Along with the blacklist, the FATF also issues the grey list, which enlists countries with a higher risk of money laundering and terrorism financing (yes, definitely less than the blacklisted countries). These countries are put on the grey list because FATF is assured that they are working towards improving their AML compliance structure.
The main difference between the countries mentioned on the blacklist and the grey list is that the former shows no signs of making an effort toward the AML compliance structure. At the same time, the latter follows the FTAF recommendation to fix the issues in their AML compliance and regulatory framework.
The FATF scrutinizes the grey list regularly to check the specified countries’ progress towards an efficient AML compliance framework. The FATF assesses the progress of the countries on the grey list. Since last year, several countries have been on the FATF Grey list, including Cambodia, Botswana, Cayman Islands, Mauritius, Panama, Uganda, Syria, UAE, and many more.
This list is also updated frequently, and de-listings and new additions are made based on the performance of the countries and the thorough analysis done by the FATF basis various parameters.
Click here to get updated FATF Blacklist and Grey list
FATF Blacklist and Grey list - Screening & monitoring process
Financial institutions and the designated non-financial businesses and professions, including virtual asset service providers, must continuously monitor their customer databases against FATF Blacklist and Grey list.
The screening will help them be alert against the non-cooperative countries that are not taking the AML compliance process seriously. It will protect them from doing business with such countries, which can cause financial losses and reputational damage. So, continuous monitoring is necessary to protect a nation’s financial system from the risk of money laundering and non-compliance with the AML laws and regulations.
So, they should keep the identity verification, Customer Due Diligence, and Enhanced Due Diligence process updated and screen the customers regularly against the sanction lists, the FATF blacklist, and the grey list. Identification of suspicious transactions and accounts should be immediately reported to the authorities. With the timely submission of STRs and SARs – institutions will contribute to and help strengthen the fight against money laundering and financing of terrorism.
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Jyoti Maheshwari
Chartered Accountant
Jyoti has over 5 years of hands-on experience in regulatory compliance, policymaking, risk management, technology consultancy, and implementation. She holds vast experience with Anti-Money Laundering rules and regulations and helps companies deploy adequate mitigation measures and comply with legal requirements. Jyoti has been instrumental in optimizing business processes, documenting business requirements, preparing FRD, BRD, and SRS, and implementing IT solutions.
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This post first appeared on A Detailed Guide Of AML Compliance Requirements For Auditors And Accountants In The UAE, please read the originial post: here
