The Financial Action Task Force (FATF) is an intergovernmental organization established to protect the integrity and stability of the international financial system. You can read more about what it does here.
But for those who don't know, more than 200 jurisdictions worldwide follow the FATF's guidelines and recommendations to strengthen their anti-money laundering and counter-terrorist financing measures.
And what does that mean?
It means this: When the FATF Global Network gets together, it's a big deal because policies are put in motion that shape how countries and institutions worldwide combat financial crime.
From October 25-27, the fourth Plenary of the FATF, under the Presidency of T. Raja Kumar of Singapore, was held in Paris. Note that observer organizations, such as the International Monetary Fund, the United Nations, the World Bank, INTERPOL, and the Egmont Group of Financial Intelligence Units, were also in attendance.
Let's now dive into five outcomes you need to know.
1. FATF's Grey List: Who's On? And Who's Off?
The FATF Grey List contains jurisdictions with weaker measures in their anti-money laundering and counter-terrorist financing (AML/CTF) regimes under increased monitoring.
When the FATF places a country on the grey list, it harms its economy and global reputation. On the other side of the coin, when a country is removed from the list, it's often a cause for celebration. Why? Because it means reforms that strengthen their financial systems have worked.
But what countries did FATF remove? And who did they add?
Added in October 2023:
Removed in October 2023:
- Cayman Islands
You can read the complete October 2023 FATF Grey List here.
In this post, we won't delve too much into the reaction to the updates. But two further points are noteworthy. AML Intelligence reported "shock" that EU member-state Bulgaria was added to the list. Furthermore, the same report also suggests that the UAE's push to exit the dirty money list is gathering pace and is set to be greenlit.
2. FATF Black List: Stays the Same
FATF high-risk jurisdictions subject to a call for action is known as the blacklist. No changes were made in October 2023, with three countries appearing:
- Democratic People's Republic of Korea (DPRK)
3. Crowdfunding for Terrorism Financing Review
Featuring near the top and prominently of the FATF Plenary October 2023 media release is a section stating that participants discussed the situation in the Middle East. Although not specified publically, the emphasis on terrorist financing is, in all likelihood, a response to the 2023 Hamas attack on Israel.
Numerous organizations with a financial crime remit, such as FinCen in the US, are currently (at the time of writing) doubling down on the issue. On October 20, 2023, FinCen issued a terrorist financing red flags alert regarding the Hamas attack.
But back to the FATF. Here is what they stated are the next steps:
- On October 31, the FATF will publish a key report on Crowdfunding for Terrorism Financing.
- The FATF will also initiate efforts to assess how countries address the criminalization of terrorism financing (Recommendation 5).
- Members agreed on revisions to the FATF Recommendation 8, to clarify measures applying to NPOs.
4. Look Out for a Series of FATF Reports in November 2023
The FATF is set to publish a wave of key reports in November 2023. Joining the Crowdfunding for Terrorism Financing report will be the following:
- Combating the Abuse of NPOs for Terrorist Financing
- Illicit Financial Flows from Cyber-Enabled Fraud
- Misuse of Citizenship and Residency by Investment Programmes
- Improving Asset Recovery
- Collaboration with Asset Recovery Networks (ARINs)
- Updated Best Practices Paper on Combating the Abuse of Non-Profit Organisations
- Assessing Beneficial Ownership and Transparency in the Next Round of Mutual Evaluations
The FATF News page keeps an active timeline recording the release of new reports.
5. Other Noteworthy Updates
Here is a selection of additional outcomes from the gathering in Paris:
Brazil: The FATF revealed it had discussed the joint FATF/GAFILAT (Financial Action Task Force of Latin America) mutual evaluation report of Brazil. Although the language does not appear strong - in reality, it packs a punch. AML Intelligence reported that the FATF "panned" South America's largest economy, and measures to combat the financing of terrorism require significant improvements to be effective.
Russia: Russian FATF membership continues to be suspended.
Indonesia: The world's fourth most populous nation is the FATF's 40th member due to progress made to improve its AML/CFT regime.
They are all the key outcomes from the fourth Plenary of the FATF, which took place from October 25-27. The fifth plenary session will take place in February 2024.
sanctions.io keeps an up-to-date page with FATF high-risk and grey list jurisdictions. You can open and bookmark it here.
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