Global AML watchdog FATF announces major changes to criteria for placing countries on its "grey list" of nations under increased monitoring.
The Financial Action Task Force (FATF), the global watchdog for anti-money laundering (AML), has announced significant changes to the criteria for placing countries on its “grey list.” This list includes nations under increased scrutiny for potential deficiencies in their financial regulations. The revised criteria aim to ease the burden on lesser-developed countries while targeting jurisdictions that pose a greater risk to the global financial system.
The new guidelines prioritize the review of countries that are FATF members, those listed as high-income by the World Bank, and nations with financial sector assets exceeding $10 billion. In contrast, countries designated as least developed by the United Nations will not be actively reviewed unless the FATF identifies them as posing a significant risk related to money laundering, terrorist financing, or proliferation financing. If such a country is reviewed, it may receive an extended observation period to work on its Key Recommended Action roadmap.
These changes could lead to a substantial reduction in the number of “low-capacity countries” on the grey list, potentially halving their representation. This initiative marks the first major policy shift since Elisa de Anda Madrazo became the FATF President in July. Her leadership coincides with this week’s plenary session in Paris, which is her first as president.
The decision to amend the grey list criteria comes in response to criticisms that the FATF had been overly punitive toward emerging-market nations while being lenient on wealthier member states. A recent FATF report highlighted significant deficiencies in regulatory practices in more developed countries, including the United States, Australia, and Switzerland. These nations were criticized for failing to adequately regulate designated non-financial businesses and professions, such as casinos, real estate agents, and law firms.
“What’s changed is how we treat the countries that have such strategic deficiencies,” de Anda was quoted as saying in a Bloomberg report. “If you’re an FATF member or a high-income country, you’ll be held to a higher standard.”
While the FATF has not indicated changes to its review process for the black list, which currently includes Iran, North Korea, and Myanmar, the revised grey list criteria could benefit countries like the Philippines. The Philippines has expressed its desire to exit the grey list soon. Currently, it is one of 21 nations flagged for insufficient oversight of risks associated with its casino junket sector.
In response to its grey list status, Philippine President Ferdinand Marcos Jr. issued a Memorandum Circular last year. This directive called for 44 government agencies, including the Philippine Amusement and Gaming Corporation (PAGCOR), to review their requirements and take necessary actions to ensure the country can exit the grey list within the specified timeframe. PAGCOR Chairman and CEO Alejandro Tengco has also appointed a new President and COO, Atty. Wilma Eisma, to oversee the efforts aimed at removing the Philippines from the FATF’s grey list as swiftly as possible.
The FATF emphasized that illicit financial flows can severely impact least developed countries, exacerbating issues like human trafficking and child exploitation. Such crimes divert billions of dollars from essential public services, including education and healthcare. By targeting the proceeds of crime and reducing criminals’ access to their ill-gotten gains, the FATF aims to bolster the economic and social foundations of these countries.
As nations like the Philippines work toward improving their compliance, the FATF’s new criteria may pave the way for more effective cooperation and support in the fight against financial crime.
Read related article: Philippines Likely to Exit FATF Grey List Soon –DOJ
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