The European Commission issued a draft Delegated Regulation (the "Draft Regulation") on January 7, 2022, revising its list of "high-risk third nations" ("EU AML List") recognized as having critical inadequacies in their anti-money laundering/counter-terrorist financing rules.
FATF blacklist and FATF blacklist countries are important to consider in the context of the Draft Regulation, as countries on the FATF blacklist are considered to be at the highest risk of money laundering and terrorist financing. As of September 20, 2023, there are three countries on the FATF blacklist: North Korea, Iran, and Myanmar.
The Draft Regulation seeks to add nine countries to the EU AML List and remove five countries. It will be offered for approval to the EU Council and the European Parliament. If neither party objects, it will be published in the European Union's Official Journal and will enter into effect 20 days following publication.
The Financial Action Task Force (FATF) complimented Ghana on the tremendous progress it has achieved in resolving the strategic shortcomings in its Anti-Money Laundering / Combating Terrorism Financing (AML/CFT) regime that the FATF had previously identified.
Ghana's Removal from FATF's Grey List
Following an on-site visit by the International Cooperation Review Group (ICRG), the FATF announced at its Plenary meeting on June 25 that Ghana had satisfactorily completed its Action Plan and would no longer be subject to the FATF's improved monitoring procedure and thus had been removed from its "grey list."
It is said that Ghana would continue to develop its AML/CFT regime in collaboration with the Inter-Governmental Action Group towards Money Laundering and Terrorist Financing in West Africa (GIABA), of which it is a member.
Considering the economic ramifications of being on FATF blacklist and greylist, this is a massive relief for the country. In addition, this would improve trust in the integrity of our financial ecosystem, as well as foreign direct investment, remarked Ghana's Finance Minister, Ken Ofori-Atta.
The Second Round of Mutual Evaluation
In 2016, Ghana was exposed to the Second Round of Mutual Evaluation by GIABA. While this demonstrated considerable progress over the last review in 2009, there were still substantial gaps that needed to be addressed, prompting the ICRG to place Ghana under monitoring.
As a direct result of Ghana's inclusion on the FATF list, the European Union put Ghana on its list of high-risk third nations with strategic flaws in its Anti-Money Laundering and Countering the Financing of Terrorism (AML/CFT) administration in October 2020. On January 7, 2022, the European Commission withdrew Ghana from the EU Blacklist by recognizing that the country no longer had strategic shortcomings in its AML/CFT regimes.
Ghana's Future in AML Regime
The Intergovernmental Group for Action against Money Laundering in West Africa (GIABA) is a regional body tasked with supporting member states in the development of AML/CFT policies and programs. As a member of GIABA, Ghana cooperates with the organization to strengthen the AML/CFT regime.
Ghana has made significant progress in improving its AML/CFT regime since it was included in the 'grey list' of the FATF in 2019. This led the European Union to add Ghana to its list of high-risk third countries in 2020. However, Ghana's removal from the FATF 'grey list' in 2021 and subsequent removal from the EU AML list in 2022 showed that the country had made significant strides in strengthening its AML/CFT regime.
Collaboration with GIABA is critical to Ghana's progress. GIABA provided technical assistance, training, and other capacity-building support to Ghana's AML/CFT authorities. This support has allowed Ghana to improve its legal and regulatory framework, improve risk assessment and strengthen its financial intelligence unit (FIU).
Going forward, Ghana's cooperation with GIABA will be crucial to its future success in combating money laundering and terrorist financing. The country should continue to strengthen its AML/CFT regime, particularly in the areas of oversight, enforcement and international cooperation. Ghana's AML/CFT authorities must also remain vigilant and proactive in identifying emerging risks and trends in money laundering and terrorist financing.
Being on EU Money Laundering List
The EU Money Laundering List is a list of countries identified by the European Commission as having strategic shortcomings in their AML/CFT frameworks. It is also known as the EU's list of high-risk third countries. The list is updated regularly and includes countries considered to pose a high risk to the EU's financial system as a protection for companies in their jurisdiction.
Being on the EU Money Laundering List can significantly affect a country. Financial institutions operating within the EU must apply enhanced due diligence measures when dealing with transactions involving listed countries. This means they need to do more particular checks on the source of the funds and the identity of those involved in the transaction. Suppose financial institutions consider the perceived risks associated with financial transactions involving these countries high for their risk appetite. In that case, they may decide not to do business with the countries on the list.
In addition, being on the EU Money Laundering List may result in further scrutiny from regulatory authorities. Financial transactions between these countries on the list are subject to additional regulatory oversight and monitoring because authorities try to ensure they are not used to facilitate money laundering or terrorist financing activities.
The consequences can extend beyond the financial sector. In some cases, countries on the list may be subject to sanctions or restrictions on financial activities. This can significantly impact a country's economy because it can limit its ability to access international markets and finance.
It is worth noting that it needs not reflect a country's overall economic or political stability. Instead, it assesses the country's frameworks to combat money laundering and terrorist financing. Countries on the list can take steps to address deficiencies identified by the European Commission for future delisting.
FATF's Grey and Blacklist- EU AML List
FATF blacklist and FATF blacklist countries are important to consider in the context of the European Commission's dedication to improving compliance with the FATF documenting procedure, as well as the fact that the FATF and EU listing procedures are not yet coordinated.
The FATF maintains two lists:
- FATF Public Statement (also known as the FATF's blacklist): This list includes jurisdictions with strategic AML/CFT deficiencies that pose a significant threat to the global financial system.
- FATF Monitoring List (also known as the FATF's grey list): This list includes jurisdictions that are actively working with the FATF to address strategic AML/CFT deficiencies.
The EU has a single list of high-risk third countries, known as the EU AML List. This list is based on the FATF's lists, but it may also include additional countries that the EU has identified as being at high risk of money laundering and terrorist financing.
The fact that the FATF and EU listing procedures are not yet coordinated can lead to some confusion. For example, a country may be on the FATF's grey list but not the EU AML List, or vice versa. This is because the EU has its own criteria for determining which countries to include on its list.
The European Commission is working to improve coordination with the FATF on listing procedures. This would help to ensure that countries that are at the highest risk of money laundering and terrorist financing are subject to the same enhanced due diligence requirements by financial institutions and other businesses.
In addition, the European Commission is also working to improve compliance with the FATF documenting procedure. This procedure requires financial institutions and other businesses to obtain and retain certain information about their customers and transactions. This information can be used to identify and report suspicious activity.
By improving compliance with the FATF documenting procedure, the European Commission is helping to combat money laundering and terrorist financing.