Exploring Financial Action Task Force's Black and Grey Lists in the Year 2024
The Financial Action Task Force (FATF), an intergovernmental organization established in 1989 to combat money laundering and terrorist financing, maintains two lists of countries: the black list and the grey list. These lists serve as a global warning system for countries with strategic deficiencies in their Anti-Money Laundering/Combating the Financing of Terrorism (AML/CFT) regimes.
The FATF Black List
Countries on the black list, such as North Korea, Iran, and Myanmar, are considered non-cooperative in the global effort to combat money laundering and terrorist financing. These countries pose a significant threat as safe havens for money laundering and terrorist financing and typically face sanctions, restrictions on correspondent banking, trade, and investment flows. Being on the black list signifies the highest risk with direct sanctions and operational barriers.
The FATF Grey List
The grey list includes countries that have strategic deficiencies in their AML/CFT regimes but have committed to addressing these issues. As of June 2024, countries on the grey list include Bulgaria, Burkina Faso, Cameroon, Croatia, Democratic Republic of the Congo, Haiti, Kenya, Mali, Monaco, Mozambique, Namibia, Nigeria, Philippines, Senegal, South Africa, South Sudan, Syria, Tanzania, Venezuela, Vietnam, Yemen. While not as severe as blacklisting, greylisting still carries economic and reputational consequences and can lead to increased scrutiny and stricter transaction requirements.
Implications for Businesses Dealing with Customers from these Regions
For countries on the black list, businesses must apply mandatory enhanced due diligence (EDD). Transactions involving these jurisdictions require close scrutiny, and financial institutions may face operational restrictions, higher compliance costs, and potential legal risks. Businesses might experience reduced access to banking services, sanctions-related restrictions, and difficulties in trade or investment partnerships when engaging with blacklisted regions.
For grey-listed countries, EDD is strongly recommended and often necessary depending on the institution’s risk appetite and regulatory context. Businesses must implement increased monitoring and may face a higher volume of alerts, necessitating refined risk-based approaches and advanced screening technologies to distinguish genuine risks. Transactions may undergo additional investigation or approval steps, impacting onboarding and ongoing business relationships.
Both lists influence customer and transaction screening systems, requiring regular updates and vigilant compliance to FATF standards. These lists affect risk assessments and can influence decisions on whether to onboard customers or engage in transactions from these jurisdictions.
In AML compliance, businesses should screen customers' residency and/or nationality to properly assess whether the person is related to any FATF black- or grey-listed countries. Countries on the grey list are closely monitored by the FATF and are required to report on the progress of their improvements.
Enhancing AML/CFT frameworks is crucial for countries to comply with international standards. This includes strengthening legal and regulatory frameworks. Financial institutions in listed countries are subject to stricter compliance requirements and must adopt Enhanced Due Diligence measures to mitigate risks associated with financial crimes for higher-risk cases.
Automated AML screening can be used to monitor individuals on global sanctions lists, including OFAC, UN, EU, and others, to further aid businesses in maintaining compliance. Regular assessments and providing progress reports to the FATF are required for countries on the grey list. To be removed from the FATF grey list, countries must address strategic deficiencies in their regimes to counter money laundering, terrorist financing, and proliferation financing.
In conclusion, the black list signifies the highest risk with direct sanctions and operational barriers, while the grey list indicates elevated risk with mandatory monitoring and corrective commitment, serving as a cautionary stage before possible blacklisting. For businesses, dealing with customers from blacklisted countries entails mandatory stringent controls and potential prohibitions, whereas dealing with grey-listed countries requires enhanced scrutiny with a focus on risk management and compliance vigilance.
[1] https://www.fatf-gafi.org/publications/fatfrecommendations/documents/fatfrecommendation-01.html [2] https://www.fatf-gafi.org/publications/fatfrecommendation/documents/fatfrecommendation-08.html [3] https://www.fatf-gafi.org/publications/fatfrecommendation/documents/fatfrecommendation-12.html [4] https://www.fatf-gafi.org/publications/fatfrecommendation/documents/fatfrecommendation-16.html
- Businesses involved in the education-and-self-development industry should educate themselves about the countries on the FATF black and grey lists to avoid potential legal risks and financial complications, especially when engaging in partnerships or transactions with entities from these regions.
- The finance and business sectors in education-and-self-development might need to implement enhanced due diligence measures when dealing with customers from grey-listed countries, considering the increased monitoring, scrutiny, and reporting requirements these countries face.
