The Financial Action Task Force (FATF) blacklist (sometimes referred to as the OECD blacklist) is a list of countries that the intragovernmental organization considers non-cooperative in the global effort to combat money laundering and the financing of terrorism. By issuing the list, the FATF hopes to encourage countries to improve their regulatory regimes and establish a global set of AML/CFT standards and norms.
Officially known as High-Risk Jurisdictions subject to a Call for Action, the FATF blacklist sets out the countries that are considered deficient in their anti-money laundering and counter-financing of terrorism regulatory regimes. The list is intended to serve not only as a way of negatively highlighting these countries on the world stage, but as a warning of the high money laundering and terror financing risk that they present. It is extremely likely that blacklisted countries will be subject to economic sanctions and other prohibitive measures by FATF member states and other international organizations.
The blacklist is a living document and is issued and updated periodically in official FATF reports. Countries are added and withdrawn from the blacklist as their AML and CFT regulatory regimes are adjusted to meet the relevant FATF standards. The first FATF blacklist was issued in 2000 with an initial list of 15 countries. Since then, the lists have been issued as part of official FATF statements and reports on a yearly, and sometimes twice-yearly, basis. The current FATF blacklist includes two countries: North Korea and Iran.
While it has no direct investigatory powers, the FATF monitors global AML/CFT regimes closely to inform the content of its blacklists. Some observers have criticized the use of the term “non-cooperative” in reference to countries on the blacklist, pointing out that some may, rather than acting in defiance of international best practice, simply not have the regulatory infrastructure or resources to enact the FATF’s AML/CFT standards.
In addition to its blacklist, the FATF also issues a grey list, officially referred to as Jurisdictions Under Increased Monitoring. Like the blacklist, countries on the FATF grey list represent a much higher risk of money laundering and terrorism financing but have formally committed to working with the FATF to develop action plans that will address their AML/CFT deficiencies.
The countries on the grey list are subject to increased monitoring by the FATF, which either assesses them directly or uses FATF-style regional bodies (FSRBs) to report on the progress they are making towards their AML/CFT goals. While grey-list classification is not as negative as the blacklist, countries on the list may still face economic sanctions from institutions like the IMF and the World Bank and experience adverse effects on trade.
The grey list is updated regularly as new countries are added or as countries that complete their action plans are removed. The current FATF grey list, issued on 21 February 2020, includes the following countries: Albania, the Bahamas, Barbados, Botswana, Cambodia, Ghana, Iceland, Jamaica, Mauritius, Mongolia, Myanmar, Nicaragua, Pakistan, Panama, Syria, Uganda, Yemen and Zimbabwe.
Given the increased risk of money laundering and terror financing that blacklisted and greylisted countries present, most financial authorities require firms to have suitable risk-based AML/CFT protections in place to mitigate that threat.
Accordingly, firms must screen customers against the FATF blacklist and grey list during onboarding and throughout their business relationship and monitor their transactions on an ongoing basis. To screen accurately, firms should ensure that their customer due diligence measures verify their customer’s residence in, or business with, listed countries and that their transaction monitoring measures are able to scrutinize the size, frequency and pattern of transactions involving high-risk countries to establish whether criminal activity such as money laundering is taking place.
When suspicious activity is detected, firms must submit suspicious activity reports (SAR) to the appropriate financial authorities so that enforcement actions can be taken.