The FATF Grey List, officially known as “Jurisdictions Under Increased Monitoring,” comprises countries or jurisdictions identified by the Financial Action Task Force (FATF) as having strategic deficiencies in their anti-money laundering (AML) and counter-terrorist financing (CTF) regimes but that have committed to addressing these deficiencies through the implementation of an action plan.
Key Points:
- Purpose: The FATF Grey List aims to signal jurisdictions that need to improve their AML/CTF frameworks but are actively working towards compliance. It encourages these jurisdictions to enhance their systems to meet international standards and reduce the risk they pose to the global financial system.
- Criteria for Listing: Jurisdictions are placed on the Grey List based on FATF evaluations that reveal deficiencies in their AML/CTF controls. These deficiencies are less severe than those of jurisdictions on the Black List but still significant enough to require remediation.
- Commitment to Action: Jurisdictions on the Grey List have provided high-level political commitments to address the identified deficiencies and have agreed to work with the FATF and its regional bodies to develop and implement an action plan.
- Consequences for Listed Jurisdictions:
- Increased Monitoring: The FATF and its regional bodies monitor the progress of these jurisdictions in implementing their action plans.
- Enhanced Due Diligence: Financial institutions are advised to apply enhanced due diligence measures to transactions involving these jurisdictions, recognizing the potential risks.
- Potential Reputational Impact: Being listed can affect a country’s reputation and may influence investor and financial institution behavior, potentially leading to reduced foreign investment and higher compliance costs.
- Process for Removal: Jurisdictions can be removed from the Grey List by demonstrating substantial progress in addressing the identified deficiencies and fully implementing the agreed-upon action plan. The FATF conducts periodic reviews to assess progress.
- Examples of Deficiencies:
- Inadequate AML/CTF legislation and regulations.
- Weak enforcement of existing laws.
- Poor financial transparency and lack of effective measures to identify beneficial ownership.
- Insufficient international cooperation in combating financial crimes.
- Support and Assistance: The FATF and its regional bodies provide technical assistance, training, and guidance to help jurisdictions on the Grey List strengthen their AML/CTF regimes.
- Impact on the Global Financial System: The Grey List helps maintain the integrity of the global financial system by identifying jurisdictions with vulnerabilities and encouraging them to take corrective actions. This reduces the risk of financial crimes and promotes global financial stability.
- Coordination with Other Lists: The FATF Grey List is coordinated with other international efforts and lists, ensuring a comprehensive approach to identifying and addressing AML/CTF deficiencies worldwide.