FATF grey list countries 2021

 What is the financial action task force (FATF)? & FATF white list countries 2021

The FATF GREY list is prepared by the Financial Action Task Force (FATF), an intergovernmental body formed to combat money laundering. It was established in July 1989 by the G7 Summit at the Arche de la Defense in France as part of the group’s efforts to curb drug trafficking. The task force was convened from the G-7 member States, the European Commission and eight other countries. The Economic Declaration from that G-7 Summit states that the task force is convened “to assess the results of cooperation already undertaken in order to prevent the utilisation of the banking system and financial institutions for the purpose of money laundering, and to consider additional preventive efforts in this field, including the adaptation of the legal and regulatory systems so as to enhance multilateral judicial assistance”.

The FATF is headquartered in Paris and has two official languages: English and French. It also has a French name: Groupe d’action financière (GAFI). It periodically lists out countries and jurisdictions that are identified as having strategic deficiencies in their regimes to counter money laundering. The list is referred to as the FATF grey list.

Since its inception, the global agency has played a key role in identifying and preventing financial crime by setting standards and promoting effective implementation of legal, regulatory and operational measures. Today, FATF is regarded as the global anti-money laundering watchdog and its policies are highly regarded and treated as law by members and many non-members. The agency has more than 200 countries and jurisdictions as its subjects. It has developed the FATF Recommendations, or FATF Standards, ensuring a “co-ordinated global response to prevent organised crime, corruption and terrorism”. By working against money laundering, the agency looks to tackle other crimes such as illegal drug deals, human trafficking and funding for weapons of mass destruction.

The FATF is involved in reviewing money laundering and terrorist financing techniques and constantly strengthens its standards to address new and emerging risks. The task force also monitors countries to ensure they implement its standards fully. The process of monitoring the implementation of its Recommendations is done through peer reviews or “mutual evaluations” of member countries. Following the review, the FATF lauds good efforts from countries and also holds non-complying countries to account.

To identify non-complying countries, FATF has maintained the FATF blacklist or the “Call for action” countries and the FATF grey list or the “Other monitored jurisdictions” since 2000. The FATF blacklist is the agency’s official list of “Non-Cooperative Countries or Territories” (NCCTs) which it judges to be non-cooperative in the global fight against money laundering and terrorist financing.

According to the FATF, the NCCTs are those having “significant strategic deficiencies in their regimes to counter money laundering, terrorist financing, and financing of proliferation”. In connection with the blacklisted countries, the agency cautioned its members “to apply enhanced due diligence, and in the most serious cases, to apply counter-measures to protect the international financial system from the ongoing money laundering, terrorist financing, and proliferation financing risks emanating from the country”. As of 3rd August 2020, North Korea and Iran were on the FATF blacklist.

What is the FATF Grey List?

The FATF grey list is the agency’s official list of countries and jurisdictions that are identified as having strategic deficiencies in their regimes to counter money laundering, terrorist financing, and proliferation financing. Unlike the blacklisted ones, the grey list countries actively work with the FATF to address strategic deficiencies in their regimes. “When the FATF places a jurisdiction under increased monitoring, it means the country has committed to resolving swiftly the identified strategic deficiencies within agreed timeframes and is subject to increased monitoring,” says the FATF.

These countries are mandated to periodically report on the progress made in addressing the identified strategic deficiencies, while the FATF closely monitors the progress of their agreed action plans expeditiously and within the proposed timeframes. “The FATF does not call for the application of enhanced due diligence to be applied to these jurisdictions but encourages its members to take into account the information presented below in their risk analysis.”

List of Countries under FATF Grey List (2021)

While the greylisting is not as severe as the blacklisting, where countries are subjected to hard-hitting economic sanctions, it creates a negative impact on the economy of the listed country. Their transactions on the international level are closely monitored and thoroughly scrutinized. Some countries may also stop economic relations with a greylisted country. As of November 2021, the following 21 countries are on the FATF grey list.

1. Albania
2. Barbados
3. Burkina Faso
4. Cambodia
5. Cayman Islands
6. Haiti
7. Jamaica
8. Malta
9. Mauritius
10. Morocco
11. Myanmar
12. Nicaragua
13. Pakistan
14. Panama
15. Philippines
16. Senegal
17. South Sudan
18. Syria
19. Uganda
20. Yemen
21. Zimbabwe

FATF & Pakistan

Since June 2018, when Pakistan made a high-level political commitment to work with the FATF and APG to strengthen its AML/CFT regime and to address its strategic counter terrorist financing-related deficiencies, Pakistan’s continued political commitment has led to significant progress across a comprehensive CFT action plan.

The FATF recognises Pakistan’s progress and efforts to address these CFT action plan items and notes that since February 2021, Pakistan has made progress to complete two of the three remaining action items on demonstrating that effective, proportionate and dissuasive sanctions are imposed for TF convictions and that Pakistan’s targeted financial sanctions regime was being used effectively to targeted terrorist assets.

Pakistan has now completed 26 of the 27 action items in its 2018 action plan. The FATF encourages Pakistan to continue to make progress to address as soon as possible the one remaining CFT-related item by demonstrating that TF investigations and prosecutions target senior leaders and commanders of UN designated terrorist groups.

In response to additional deficiencies later identified in Pakistan’s 2019 APG Mutual Evaluation Report (MER), Pakistan has made progress to address a number of the recommended actions in the MER and provided further high-level commitment in June 2021 to address these strategic deficiencies pursuant to a new action plan that primarily focuses on combating money laundering.

Pakistan should continue to work to address its strategically important AML/CFT deficiencies, namely by:

1. enhancing international cooperation by amending the MLA law
2. demonstrating that assistance is being sought from foreign countries in implementing UNSCR 1373 designations
3. demonstrating that supervisors are conducting both on-site and off-site supervision commensurate with specific risks associated with DNFBPs, including applying appropriate sanctions where necessary

4. demonstrating that proportionate and dissuasive sanctions are applied consistently to all legal persons and legal arrangements for non-compliance with beneficial ownership requirements

5. demonstrating an increase in ML investigations and prosecutions and that proceeds of crime continue to be restrained and confiscated in line with Pakistan’s risk profile, including working with foreign counterparts to trace, freeze, and confiscate assets

6. demonstrating that DNFBPs are being monitored for compliance with proliferation financing requirements and that sanctions are being imposed for non-compliance.

Jurisdiction No Longer Subject to Increased Monitoring by the FATF

Ghana

The FATF welcomes Ghana’s significant progress in improving its AML/CFT regime. Ghana has strengthened the effectiveness of its AML/CFT regime and addressed related technical deficiencies to meet the commitments in its action plan regarding the strategic deficiencies that the FATF identified in October 2018. Ghana is therefore no longer subject to the FATF’s increased monitoring process. Ghana will continue to work with GIABA to improve further its AML/CFT regime.

FATF Grey list Screening & Monitoring

The FATF grey list screening and monitoring is the process of screening customers against the FATF grey list by firms ensuring the effectiveness of their AML programme. Normally, financial regulators across the globe mandate their subjects to do necessary checks while onboarding customers and throughout their business relationships. Screening a customer against the FATF blacklist and grey list and monitoring their transactions on an ongoing basis will help mitigate AML/CFT risks effectively.

For effective and efficient FATF grey list screening, regulatory technology (regtech) companies such as Tookitaki offer solutions based on modern technologies including AI and machine learning. As part of its award-winning Anti-Money Laundering Suite (AMLS), Tookitaki developed a Smart Screening solution leveraging advanced machine learning and Natural Language Processing (NLP) techniques. The solution helps accurately score and distinguish a true match from a false match across names and transactions in real-time and in batch mode. In addition to screening against sanctions lists, the solution covers politically exposed persons (PEPs), adverse media and local/internal blacklist databases.

Few important points:

1) Since when Pakistan is in Grey List?

Pakistan is in the Grey List of FATF since June 2018.

2) Why Turkey has now been enlisted in Grey List (Watch List)?

FATF finds that Turkey in Involved in supporting  terror organizations financially and is not acting against money laundering.

3) Is it so, that Pakistan is retained in Grey List and India is behind the scene?

No! The President of FATF Mr. Pleyer made it loud and clear that India stands nowhere and there was no such pressure from Indian side. FATF is an organization where decisions are taken on majority and most of the members out of 39 were in favour of keeping Pakistan in Grey list. There was no further discussion on blacklisting Pakistan.

4) Will Pakistan, Turkey and other 20 nations who have been grey listed be affected financially?

Yes! So far as Pakistan is concerned it is estimated that it is going to face an annual erosion of $ 30 million and no it will be quite difficult to get out of the soup.

5) Is there any country or countries who have been taken out of the Grey List?

Yes! Botswana and Mauritius are those nations who are dropped from the list.

6) Till When, Pakistan is retained in Grey List?

Pakistan has been kept in the list till April 2022.

7) Is there any country who have been put under BLACK LIST of the FATF?

Yes! there are two nations viz North Korea and Iran.

As of 21 February 2020, only two countries were on the FATF blacklist: North Korea and Iran.