On October 21, 2021, the Financial Action Task Force (FATF) released updates to its list of Jurisdictions under Increased Monitoring, or the “Grey List.” In the update, FATF added Jordan, Mali, and Turkey, and removed Botswana and Mauritius. There was no change to FATF’s High-Risk Jurisdictions subject to a Call for Action, as Iran and North Korea remain the only countries subject to these countermeasures.
FATF identifies jurisdictions with anti-money laundering and combating the financing of terrorism (AML/CFT) deficiencies in two public documents issued three times a year. The two public documents are Jurisdictions Under Increased Monitoring and High-Risk Jurisdictions Subject to a Call for Action.
Jurisdictions Under Increased Monitoring— “Grey List”
Jurisdictions designated as under increased monitoring are actively working with FATF to address strategic deficiencies in their regimes in the areas of AML, CFT, and proliferation financing (PF).These jurisdictions have committed to “resolve swiftly the identified strategic deficiencies within agreed timeframes and is subject to increased monitoring.”
Jurisdictions with Strategic Deficiencies
Jurisdictions no Longer Subject to Increased Monitoring
*Jurisdictions added in October 2021
High-Risk Jurisdictions Subject to a Call for Action— “Black List”
Jurisdictions designated as high-risk have significant strategic deficiencies in their AML/CFT/PF regimes. Accordingly, FATF “calls on all members and urges all jurisdictions to apply enhanced due diligence, and in the most serious cases…to apply counter-measures to protect the international financial system…”
Iran and North Korea are the only countries currently identified on FATF’s list of High-Risk Jurisdictions Subject to a Call for Action.
What This Means for You
FATF’s “Grey List” and “Black List” are commonly used by US and non-US financial institutions to assess AML/CFT geographic risk and country risk rating. Therefore, US and non-US financial institutions should consider whether they need to update their country risk ratings in response to these updates.
In addition, certain US financial institutions1 are subject to Section 312 of the USA PATRIOT Act, which requires specialized due diligence on foreign correspondent accounts2 and enhanced due diligence (EDD) on certain foreign banks (312 EDD). US financial institutions subject to Section 312 are required to conduct 312 EDD on a foreign bank that operates under “banking license issued by a foreign country that has been designated as non-cooperative with international anti-money laundering principles or procedures by an intergovernmental group or organization of which the United States is a member and with which designation the US representative to the group or organization concurs.” As such, US financial institutions should assess their 312 EDD processes in response to the FATF updates to ensure they identify and conduct adequate due diligence on these foreign bank relationships.
Call to Action
Guidehouse can assist US and non-US financial institutions in assessing their AML/CFT programs, in areas such as:
Customer due diligence.
Enhanced due diligence.
Transaction monitoring and model validation.
Risk assessment, including enterprise wide, customer risk rating, and country risk rating.
Training, including employee training, executive training, and board of directors training.
Policies, procedures, and governance.
Our subject matter experts have a diverse set of backgrounds, including law enforcement, bank executives, and former regulators, who can help you solve your financial crime challenges.
Special thanks to Lindsay Sims for contributing to this alert.
1(1) Banking institutions; (2) securities broker-dealers; (3) futures commission merchants and introducing brokers in commodities; and (4) mutual funds.
2The final rule applies to correspondent accounts maintained for the following foreign financial institutions: (1) a foreign bank; (2) a foreign branch of a US bank; (3) a business organized under a foreign law that, if it were located in the United States, would be a securities broker-dealer, futures commission merchant, introducing broker in commodities, or a mutual fund; and (4) a money transmitter or currency exchanger organized under foreign law.