What Should AML Teams Do When a Country Gets FATF Greylisted?

When a country is greylisted by the Financial Action Task Force (FATF), it reveals significant weaknesses in its anti-money laundering (AML) framework. For businesses, especially those with connections to high-risk jurisdictions, this can lead to substantial operational and compliance challenges.

And the reality is this: AML teams must act swiftly to mitigate risks and ensure ongoing compliance. This article will outline the essential steps AML teams should take to address the immediate challenges posed by a FATF greylisting. Let's dive in.

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What's the FATF Greylist, Anyway?

The FATF greylist is where high-risk countries land if they're not meeting international anti-money laundering (AML) and counter-financing of terrorism (CFT) standards. While it's not as severe as blacklisting, being placed on the greylist still signals significant deficiencies in a country's regulatory framework.

Countries on the greylist face a serious reputation hit, as they're seen as vulnerable to financial crime, which leads to reduced foreign investments, limited access to global financial markets, and increased scrutiny from regulators.

For businesses tied to these countries, greylisting means a heightened risk of exposure to illicit financial activities, making compliance even more critical.

Top Tip: To stay informed on the latest updates, we keep a live post on the current FATF greylist, which is worth bookmarking for quick reference.

Let's Take a Few Steps Back: Preparation is Crucial

Before diving into what you need to do when a country is added to or removed from the FATF greylist, it's essential to recognize that the best defense is a solid, proactive system for managing these changes. Greylist updates shouldn't come as a surprise—they happen three times a year (at the FATF Plenaries) and if you're well-prepared, you won’t need to scramble when they do.

The foundation of a solid AML strategy is having a system in place that allows you to quickly assess risk, adjust your controls, and act on compliance changes as they occur. This means:

Ongoing Monitoring of the FATF Greylist

Keep an eye on FATF updates, and automate alerts whenever there are changes to the greylist. Set up a dedicated task force or team to ensure someone is always tracking the status of high-risk jurisdictions. This proactive monitoring allows your team to prepare ahead of time.

Maintaining Flexible Risk Frameworks

Your risk frameworks should be flexible enough to accommodate changes in real time. Having a dynamic system means that when a country gets greylisted, you can immediately assess the new risks and make any necessary adjustments to your procedures and due diligence protocols.

Creating a Rapid Response Protocol

Ensure that your team has a clear action plan for responding to FATF greylist updates. This plan should include immediate tasks like updating risk assessments, performing enhanced due diligence, and escalating issues that could arise from the addition or removal of a country. Having this protocol ready means you won’t waste valuable time when change occurs.

By taking these preparatory steps—ongoing monitoring, maintaining flexible risk frameworks, and creating a rapid response protocol—your AML team will be equipped to handle greylist updates efficiently.

FATF Greylist Update: Immediate Actions To Take

Let's imagine a scenario that, in reality, unfolds three times a year: the FATF has just updated its greylist—new countries have been added, and others have been removed. What does this mean for your organization?

For AML teams, it's time to reassess and take swift action. Here's what your team needs to do next to stay ahead of the curve.

Update Risk Assessments

The first step is to review and update your risk assessments. If your organization has ties to a greylisted country, the risk profile of that jurisdiction has changed. This means recalibrating your risk models, considering increased exposure to financial crime, and adjusting your internal controls accordingly.

Enhanced Due Diligence (EDD)

With greylisted countries under more scrutiny, it's critical to conduct enhanced due diligence on transactions or customers with ties to these jurisdictions. Ensure you're verifying the legitimacy of entities, scrutinizing the source of funds, and identifying any potential red flags earlier in the process.

Increase Monitoring and Reporting

Greylisted countries attract more regulatory attention, so you must ramp up your transaction monitoring systems. Implement stricter monitoring criteria for high-risk countries, ensuring that any unusual or suspicious activity is flagged immediately. This means setting up alerts for transactions involving greylisted jurisdictions and ensuring compliance teams are ready to investigate.

Internal Communication and Training

AML teams must also focus on internal communication. Make sure that all relevant staff members are aware of the latest greylist updates and the impact on your organization's compliance procedures. Consider conducting training sessions to keep everyone up-to-date on new risks and how to mitigate them.

Prepare for Increased Scrutiny

As greylisted countries face greater scrutiny from regulators, so too will businesses with connections to these jurisdictions. Ensure your compliance records are airtight and readily available for inspection. This includes documentation of enhanced due diligence efforts, risk assessments, and any steps taken to mitigate potential financial crime risks.

By taking these immediate actions, AML teams can effectively navigate the complexities of FATF greylisting and ensure ongoing compliance.

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Final Thoughts and Next Steps

When a country is added to the FATF greylist, it signals a shift in the risk landscape that requires immediate attention. AML teams must act quickly to update risk assessments, perform enhanced due diligence, and strengthen monitoring to stay compliant. Proactive preparation, including monitoring greylist updates and maintaining flexible systems, will help you respond effectively.

And remember, partnering with a reliable AML screening provider like sanctions.io ensures you stay ahead of regulatory changes in real time, helping you mitigate risks and protect your organization.

Don’t wait for the next update to catch you off guard. Book a free Discovery Call now to see how we can help streamline your compliance efforts. Plus, enjoy a free 7-day trial (no credit card required) to experience firsthand the difference a reliable partner can make in real-time risk management.