Your In-Depth Guide to FATF’s Grey List and Black List

In this article, we will explain FATF Grey Lists and Blacklists, give examples of Grey Listed countries, and suggest tools that empower financial institutions to tackle the complexities and challenges of anti-money laundering compliance and fraud prevention. So, let’s start!

What is FATF?

The Financial Action Task Force (FATF) is an intergovernmental organization founded to counter illegal activities such as money laundering and terrorism financing by developing international standards and adopting effective prevention measures.

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What is The Role of FATF?

The responsibilities of FATF are:‍

1. Setting International Standards: The FATF develops global recommendations known as FATF Recommendations. These guidelines address a range of matters about anti-money laundering (AML), counter-terrorism financing (CTF), and the battling of additional threats to the integrity of the global financial system.

2. Mutual Evaluations: Mutual evaluation is a requirement for FATF member nations to assess their level of compliance with the recommendations. 

3. Listing of Jurisdictions: The FATF keeps a list of states and regions that require heightened monitoring due to deficiencies in their compliance with AML/CFT global standards.

FATF Color-Coded Lists

FATF maintains various lists to which countries and jurisdictions are added and removed based on periodic measures and updates. Below, we will be explaining two types of these lists, namely, the Grey List and the Blacklist. 

FATF Grey List

What is FATF Grey List?

FATF Grey List is composed of The High-Risk and Other Monitored Jurisdictions (the FATF high-risk countries list). The Grey List is composed of countries or jurisdictions that are identified by the FATF and labeled as having shortcomings and deficiencies in their AML and CFT frameworks. If a country is listed in the FATF Grey List, it entails:

1. It is being observed and monitored more closely, with more frequent reviews, evaluations, and reporting obligations.

2. It tarnishes the international reputation of the country, which has a detrimental effect on the state's ability to engage in financial markets, draw in new foreign investment, and maintain its participation in international trade.

Why Are Countries or Jurisdictions Placed on the FATF Grey List?

Some of the most common criteria for including a country or jurisdiction in the FATF Grey List are:

1. Lack of up-to-date and sufficient AML/CTF laws and regulations.
2. Lack of satisfactory and adequate regulatory and supervisory frameworks.
3. Lack of productive and effective financial intelligence units (FIUs).
4. Lack of robust and effective customer due diligence (CDD) measures.
5. Lack of transparency in beneficial ownership information.

What Are the Grey Listed Countries as of October 2024?

1. Algeria

2. Angola

3. Bulgaria

4. Burkina Faso

5. Cameroon

6. Côte d'Ivoire

7. Croatia

8. Democratic Republic of Congo

9. Haiti

10. Kenya

11. Lebanon

12. Mali

13. Monaco

14. Mozambique

15. Namibia

16. Nigeria

17. Philippines

18. South Africa

19. South Sudan

20. Syria

21. Tanzania

22. Venezuela

23. Vietnam

24. Yemen

There are changes in the countries that have been added to or removed from the FATF grey list over the course of a year. Below are the key differences between the FATF grey list countries of 2023 and 2024.

Countries on the FATF Grey List in 2023 but not in 2024:

1. Barbados

2. Gibraltar

3. Jamaica

4. Senegal

5. Turkey

6. United Arab Emirates (UAE)

Countries on the FATF Grey List in 2024 but not in 2023:

1. Algeria

2. Angola

3. Côte d'Ivoire

4. Kenya

5. Lebanon

6. Monaco

7. Namibia

8. Venezuela

FATF Black List

What is the FATF Black List?

Significant inadequacies in the AML/CFT frameworks of a country or jurisdiction lead the FATF to label it as a High-Risk and Non-Cooperative Jurisdiction, which is also known as the Black List. The Black List title brings on serious ramifications, such as, but not restricted to:

1. Financial and economic penalties.
2. Imposed limitations on international financial transactions.
3. Heightened monitoring of financial exchange to and from the blacklisted country.
4. Prevented and decreased access to international markets.
5. Decreased ability to draw in foreign investments.

Why Do Countries or Jurisdictions End up on the FATF Black List?

The most common reasons are:

1. Severe and serious deficits in their AML/CFT laws and regulations.
2. Negligence in criminalizing money laundering and terrorism financing.
3. Non-compliance to international standards.
4. Inadequate and non-functional Financial Intelligence Unit (FIU).

Which Countries Are on the Black List as of October 2024?

1. Democratic Republic of North Korea
2. Iran
3. Myanmar

FATF Grey List Vs. FATF Black List (A General Comparison)

FATF Blacklist countries are considered a bigger threat in terms of financial crimes, resulting in them facing more immediate and dire consequences. On the other hand, Grey List countries are given the opportunity and significant monitoring to ensure future compliance and delisting from the FATF Grey List.

Grey Lists, Blacklists, and AML Compliance: Screening and Monitoring

Screening and Monitoring are among the crucial tools for assessing AML compliance, particularly for states and areas included on the FATF's Grey and Black Lists. Screening and Monitoring practices are rudimentary for financial institutions and businesses to preserve the integrity of their operations and to remain compliant with international AML standards.

Screening

Screening practices necessitate systematically investigating people, organizations, or transactions within the Grey Lists and Blacklists to pinpoint potential risks. Specifically, financial institutions utilize screening to determine whether their customers or counterparties are associated with jurisdictions or establishments known for AML/CFT deficits (Grey List) or severe non-compliance with AML/CFT standards (Black List).

Selecting which new customers to onboard and which existing customers to perform due diligence on is a decision that compliance teams at financial institutions must make with knowledge from effective screening, which is essential for evaluating the risk factors associated with customer relationships and financial transactions.

Monitoring

Transaction monitoring is a tool that detects and reports suspicious financial activities. Its continuous and real-time attributes make it fundamental for addressing AML compliance within Grey List and Blacklist jurisdictions and countries. Increased monitoring is used for grey-listed countries to identify potential evolving risks in customer behavior and transactions.

For FATF Blacklist countries, it is a tool that enables strict scrutiny of financial transactions to ensure compliance with imposed sanctions. Effective monitoring encompasses current customer due diligence (CDD) as well. Monitoring is a proactive and preventative approach to upholding the integrity and security of financial institutions by ensuring compliance with AML standards.

The Significance of FATF Blacklists and Grey Lists Check

Regular checks of FATF Blacklists and Grey Lists are central to preserving AML and CTF standards. While Blacklists are composed of FATF high-risk countries and jurisdictions encountering strict sanctions, Grey Lists include jurisdictions with less systemic AML/CTF deficits. Through these checks, financial institutions can inspect high-risk transactions and thus perform effective due diligence and enhance international AML compliance, protecting the financial system from suspicious and illegal activities.

Summary of FATF Plenary Outcomes, October 2024

1. New FATF Presidency

The first FATF Plenary under the Presidency of Elisa de Anda Madrazo of Mexico concluded in Paris on October 25, 2024.

2. Key Discussions

1. The FATF approved the final two assessment reports of its fourth cycle, focusing on Argentina and Oman.

2. Senegal was removed from the FATF’s increased monitoring list after successfully addressing strategic deficiencies.

3. Proposals were made for revisions to FATF standards to support financial inclusion and improve national risk assessments.

3. Jurisdictions under Increased Monitoring

1. Added: Algeria, Angola, Côte d'Ivoire, Lebanon.

2. Removed: Senegal (removed after progress in addressing AML/CFT/CPF deficiencies).
   

4. Mutual Evaluation Reports

1. Argentina: Improved AML/CFT/CPF framework but needs more work on sanctions and understanding risks.

2. Oman: Improved compliance but must strengthen efforts to address money laundering risks and prosecutions.

5. Global Network Initiatives

1. For the first time, Senegal and Cayman Islands participated as guest jurisdictions to enhance inclusivity.

2. Increased cooperation with regional bodies to ensure high-quality evaluations and stronger cohesion across the global network.

6. Strategic Initiatives

1. Revised guidance for national money laundering risk assessments to help countries identify and manage illicit finance risks.

2. Ongoing projects on cross-border payment systems, terrorist financing, and preventing online child sexual exploitation.

7. FATF’s Focus on Diversity

1. A new initiative to strengthen diversity and inclusivity, including a second mentoring program for gender diversity in the FATF and global network.

8. Suspension of Russia

The suspension of the Russian Federation remains in effect due to ongoing concerns.

9. Future Plans

The FATF will finalize revisions supporting financial inclusion and risk-based approaches, with guidance expected in 2025.

Outcomes FATF Plenary, October 2023

As of the 25th-27th of October 2023, FATF released the FATF Outcomes FATF Plenary, which included:

1. FATF granted Indonesia full membership as its 40th Member.

2. FATF released a report that details guidance to strengthen the use of asset recovery networks, or ARINs, in tracking transnational money laundering cases.

3. FATF delegates decided on a considerable set of amendments to the FATF Recommendations.

4. FATF adopted reports on Illicit Financial Flows from Cyber-Enabled Fraud and the Misuse of Citizenship and Residency by Investment Programs.

5. FATF delegates agreed to release the updated FATF Risk-Based Guidance on Recommendation 25 on Beneficial Ownership and Transparency of Legal Arrangements for public consultation

6. FATF delegates discussed the joint FATF-GAFILAT assessment of Brazil.

7. FATF removed four countries from its Grey List following successful on-site visits. The four countries are Albania, the Cayman Islands, Jordan, and Panama.

8. FATF confirmed that the suspension of the membership of the Russian Federation continues to stand.

Compliance and Delisting

What Must Countries Do to Get Off the FATF Grey List or Black List?

Being removed from the FATF Grey or Black lists looks different in terms of specific plans and timelines, depending on the organization or authority that maintains the lists and the different circumstances of each jurisdiction or country.

The table below presents a general comparison of steps required by countries or jurisdictions to be delisted from the Grey List in comparison to the FATF Blacklist, specifically within the context of anti-money laundering and counter-terrorism financing.

‍How can FOCAL Help?‍

Preventative methods towards financial crimes and proactive tools that ensure compliance with Anti-Money Laundering (AML) regulations are vital now more than ever, with rapid technological advancements continuously changing financial landscapes.

FOCAL is a comprehensive platform that uses Artificial Intelligence to help you comply with Anti-Money Laundering (AML) regulations. Let's explore how FOCAL can assist you in navigating the AML space:

Compliance Control: FOCAL Transaction Screening encompasses Global Watch-lists Screening and Customer-owned Lists, ensuring robust adherence to local and international AML regulations.

Efficiency: With Real-Time Monitoring capabilities, FOCAL promptly identifies and flags potential money laundering activities, streamlining the AML compliance journey.

Customization: The Dynamic Scenario Builder, coupled with Customizable Library Rules, equips institutions to mold their AML strategies, catering to specific business needs.

Scalability: Irrespective of business size, FOCAL flexible API integration ensures seamless integration, making AML compliance more accessible.

Scenario Building: FOCAL Dynamic Scenario Builder allows institutions to create custom monitoring scenarios, improving the detection of suspicious patterns.

Risk Scoring: By offering a Customizable Score under Customer Risk Scoring, FOCAL ensures that businesses can gauge and categorize the AML risks associated with individual customer profiles accurately.

Real-time Screening: The ongoing customer screening guarantees that AML checks remain updated, reflecting evolving compliance requisites.

It is crucially important for financial institutions to remain up to date with the FATF Gray Lists and Black Lists. Moreover, adopting empowering tools such as FOCAL by Mozn can be a game-changer for all types of financial establishments. You can learn more about FOCAL by booking a demo today.