The FATF defines jurisdictions with insufficient measures against anti-money laundering and counter terrorist financing (AML/CFT) in the FATF public documents released three times a year. The FATF's policy of regularly reporting countries with poor AML/CFT regimes has proven successful. The FATF has reviewed over a hundred jurisdictions, with eighty of them being publicly recognized. Of the eighty, sixty have implemented the necessary reforms to address their AML/CFT problems and are no longer using the system.
High Risk Jurisdictions under Increased Monitoring
High-risk jurisdictions anti-money laundering, anti-terrorism funding, and anti-proliferation financing regimes have significant strategic deficiencies. The FATF encourages all countries and jurisdictions to conduct improved due diligence on all listed countries as high-risk. In the most difficult situations, countries are urged to implement countermeasures to secure the international financial system from continuing money laundering, terrorist funding, and proliferation financing (ML/TF/PF) threats arising from the region. This list is often pointed to as the "blacklist."
The FATF and FATF-style regional bodies (FSRBs) collaborate with the jurisdictions mentioned below as they reflect on their success in fixing strategic flaws. The FATF urges these countries to conclude their action plans as soon as possible and under the set timescales. The FATF praises their efforts and will keep a close eye on their success. The FATF does not recommend that improved due diligence procedures be implemented in these jurisdictions, but it does advise its members to include the details discussed below in their risk assessments.
On a regular basis, the FATF monitors new jurisdictions with strategic weaknesses in their anti-money laundering, anti-terrorism funding, and anti-proliferation financing regimes. The FATF agreed in October 2020 to reactivate its efforts to find small states with strategic AML/CFT weaknesses and prioritize the analysis of countries with expired or approaching deadlines. The other jurisdictions on the list were given the choice of reporting. Albania, Botswana, Cambodia, Ghana, Mauritius, Myanmar, Nicaragua, Pakistan, Panama, Uganda, and Zimbabwe have all had their performance evaluated by the FATF since October.
| The list of jurisdictions with strategic deficiencies | |
|---|---|
| Albania | Barbados |
| Myanmar | Nicaragua |
| Botswana | Pakistan |
| Cambodia | Senegal |
| Burkina Faso | Ghana |
| Zimbabwe | Panama |
| Uganda | Jamaica |
| Yemen | Mauritius |
| Cayman Islands | Syria |
FATF's Review Process
The FATF determines and examines jurisdictions with strategic AML/CFT weaknesses that pose a danger to the international financial system regularly, and it actively tracks their performance. The mechanism is overseen by the FATF's International Co-operation Review Group (ICRG). The procedure started in 2007 and was improved in 2009. It was modified again in 2015 to reflect the new FATF guidelines and joint assessment mechanism for evaluating the effectiveness of AML/CFT initiatives.
The FATF tests jurisdictions based on risks, deficiencies, or specific threats that they pose. When a highk risk jurisdiction is examined, it would be for the following reasons:
- The jurisdiction does not engage in a FATF-style regional body (FSRB) or does not facilitate timely publication of joint assessment data.
- It is elected by a FATF or FSRB member. The selection is focused on particular dangers or threats of money laundering, terrorism funding, or proliferation financing that have been brought to the notice of ambassadors.
- It received low marks in its joint assessment.
A country that joins the ICRG assessment process due to its reciprocal assessment performance has a one-year Observation Period to engage with the FATF or its FATF-style regional body (FSRB) to correct weaknesses until the FATF's substantive review and public identification. The FATF then prioritizes the examination of countries with larger financial sectors.
During the evaluation, the FATF recognizes the jurisdiction's technical AML/CFT weaknesses, both in terms of technical implementation and the efficiency of the policies in place, as well as any specific progress made. If the FATF concludes that the progress made to resolve its strategic deficiencies is inadequate, the FATF works with the authority to create a plan to address the existing strategic deficiencies. For all countries under ICRG review, the FATF requires a high-level political commitment that the high risk jurisdiction will implement the legal, regulatory, and operational reforms needed for the action plan.
The analyses are carried out by the ICRG's four international Joint Groups, which cover Africa/Middle East, Americas, Asia/Pacific, and Europe/Eurasia. In preparation for FATF plenary sessions, each jurisdiction under consideration has the opportunity to communicate in a face-to-face meeting to discuss the Joint Group's report.
Public Identification
The Financial Action Task Force (FATF) plays a vital role in promoting global efforts to combat money laundering and terrorist financing. After each plenary meeting held in February, June, and October, the FATF releases two important documents: the outcomes of the meeting and the public statements. These public statements provide valuable insights into the progress made by jurisdictions in implementing measures outlined in their respective action plans. The statements offer a concise overview of the specific actions taken by each jurisdiction and highlight any strategic deficiencies that require attention and resolution.
By highlighting the strengths and weaknesses of jurisdictions, these statements help identify areas where enhanced measures are needed to mitigate the risks associated with money laundering and terrorist financing. The varying degrees of risk reflected in the statements underscore the dynamic nature of the challenges faced by jurisdictions worldwide. Through the issuance of public statements, the FATF promotes transparency, accountability, and collaboration among member countries and encourages continuous improvement in AML/CFT frameworks. These statements serve as a valuable resource for policymakers, regulatory bodies, and financial institutions in their efforts to strengthen anti-money laundering and counter-terrorism financing measures globally.
Removal from FATF Review
Removing a region from FATF review is a notable accomplishment for regions committed to improving their anti-money laundering and counter-terrorism financing regimes. To escape FATF monitoring, a jurisdiction must demonstrate considerable adherence to nearly all components listed in the FATF action plan.
When adequate progress is determined, the FATF schedules an on-site inspection to validate the execution of necessary legislative, administrative, and organizational changes. This visit is intended to assess the region's political commitment and structural capacities, as well as to ensure the sustainability and efficacy of the implemented measures. A successful on-site evaluation, together with the FATF's conclusion that the required criteria have been met, leads in the jurisdiction being delisted at the following plenary conference. As a result, the jurisdiction becomes a regular participant in the FATF or the relevant Financial Stability and Review Board (FSRB) as a regular member.
However, the journey doesn't end there. The jurisdiction will continue to collaborate with the FATF or the appropriate FSRB during the routine follow-up phase to further enhance its AML/CFT regime and address any remaining areas of concern. In this process, businesses can play a vital role by implementing robust AML compliance solutions that align with FATF standards. Sanction Scanner offers AML compliance solutions that are compatible with FATF regulations, helping businesses mitigate risks and ensure compliance. Feel free to reach out to us or request a demo for detailed information on how Sanction Scanner can assist you in meeting FATF requirements.
