What are FATF Blacklists and Greylists?
The Financial Action Task Force (FATF) was established in July 1989 to combat money laundering and terrorist financing. Today, more than 200 countries follow their recommendations and AML standards. As part of their mandate to curb financial crime, the FATF blacklists countries that have been identified as being inadequate in their counter-financing of terrorist regimes or anti-money-laundering practices. This list is sometimes called the FATF AML deficient list. Before countries are blacklisted, they are placed on a greylist to first address identified strategic shortcomings as well as the agreed time frames for remediation. This article will explore the differences between blacklists and greylists in greater detail, as well as how to remain compliant.
What Is the FATF Blacklist?
The High-Risk Jurisdictions subject to a Call for Action list often referred to as the Financial Action Task Force or OECD Blacklist, is the list of countries that the FAFT considers non-cooperative and deficient in the global effort to combat money laundering/terrorist financing. The list is a measure implemented to:
- encourage countries to improve regulatory regimes;
- encourage the establishment of a global set of AML/CFT standards;
- and to negatively highlight deficient countries on the global stage as well as the high risk of money laundering and terrorist financing that these countries present.
Both North Korea and Iran were blacklisted by the FATF in 2022.
What Is the FATF Greylist?
The greylist is officially known as the Jurisdictions Under Increased Monitoring list. The countries on this list represent a higher risk of money laundering and terrorist financing, but unlike those on the official blacklist, greylisted countries have committed formally to addressing their AML/CFT deficiencies in cooperation with the FATF.
While these nations are engaged with the FATF in a cooperative and collaborative manner, they are nonetheless subject to increased monitoring. The FATF or FATF-style regional bodies (known as FSRBs) monitor, assess and report on the progress these countries make towards their AML/CFT goals.
Greylisted nations include Albania, Barbados, Cambodia, Jordan, Jamaica, Mali, Morocco, Pakistan, Panama, the Philippines, South Sudan, Senegal, Syria, the UAE, Turkey, Uganda, Myanmar, Yemen and others. See our constantly updated list of Black- and Greylisted countries.
FATF Greylist and Blacklist Removals
Countries are regularly added to black- and grey lists and can also be removed if they sufficiently progress in their efforts to address deficiencies. Mauritius was removed from the greylist in 2021 after introducing risk-based supervision plans, as were Botswana and Zimbabwe.
There has been a good deal of speculation about the removal of Iran from the FATF blacklist. Iran has made some progress and has indicated its commitment to its deficiencies but must ratify the Palermo and Terrorist Financing Conventions before removal will be considered. Despite government support, the Rouhani administration, Guardian Council, Assembly of Experts and the Supreme Leader Ayatollah Ali Khamenei have prevented measures from passing that would ensure their compliance.
Financial Institutions and Their Obligation Regarding Blacklisted/Greylisted Nations
Many of these blacklisted countries are subject to economic sanctions or other restrictions imposed by FATF member states and international organizations, although sanctions and blacklisting do not necessarily go hand-in-hand. In a similar way, greylisted nations may face economic sanctions from institutions, including the World Bank or the International Monetary Fund.
Whether or not punitive measures are taken against these nations or not, their shortcomings pose a significant regulatory risk to financial institutions as they are deficient in their AML/CFT controls.
While FATF does not have the jurisdiction to directly investigate these countries, they monitor all global AML/CFT regimes very closely.
Given the increased risk of money laundering and terrorist financing that these blacklisted and greylisted nations present, financial firms must have suitable risk-based AML/CFT protections in place to mitigate the threat. But because the FATF blacklist/greylist is a living document, countries are added and withdrawn regularly as AML/CFT regulatory regimes are adjusted according to FATF standards. Lists are issued as part of official FATF statements and reports either annually or bi-annually, and it proves challenging to remain aware of the risks involved while transacting with these nations.
Nonetheless, firms must screen customers against up-to-date FATF blacklist and greylists during onboarding and throughout their relationship with these businesses, ensuring that their customer due diligence measures verify their customer’s residence in or their business with listed countries.
