FATF Greylist

Executive Summary

The FATF Greylist comprises countries identified by the Financial Action Task Force (FATF) as having strategic deficiencies in their anti-money laundering (AML), counter-terrorist financing (CFT), and counter-proliferation financing (CPF) frameworks.
Jurisdictions on this list are under increased monitoring and have committed to addressing these deficiencies within agreed timeframes.
Inclusion can lead to enhanced due diligence measures by financial institutions and potential reputational and economic impacts.
As of February 21, 2025, the FATF updated its list of jurisdictions under increased monitoring.

Definition of FATF Greylist

The FATF Greylist refers to jurisdictions that the FATF has identified as having strategic deficiencies in their AML/CFT/CPF regimes but are actively working with the FATF to address these issues. These countries are subject to increased monitoring and are expected to implement action plans to resolve the identified deficiencies.

Background / Backstory on the FATF Greylist

Established in 1989, the FATF is an intergovernmental body that sets international standards to combat money laundering, terrorist financing, and other related threats. The Greylist was introduced to identify countries with significant AML/CFT/CPF shortcomings that are cooperating with the FATF to rectify these issues. Regular updates to the list are made following FATF plenary meetings, reflecting the dynamic nature of global financial compliance.

How Is the FATF Greylist Used in the Industry Today?

Risk Assessment: Financial institutions use the Greylist to assess the risk associated with transactions involving listed countries.
Enhanced Due Diligence: Businesses may implement stricter due diligence measures when dealing with entities from Greylisted jurisdictions.
Regulatory Compliance: Companies adjust their compliance programs to align with the increased scrutiny required for transactions involving these countries.
Strategic Planning: Organizations consider the implications of the Greylist when making decisions about entering or continuing operations in listed countries.

How Does the FATF Greylist Work in Financial Practice?

Example 1: Banking Sector

A multinational bank identifies that a potential client is based in a Greylisted country. The bank conducts enhanced due diligence, including verifying the client’s source of funds, to mitigate the risk of money laundering.

Example 2: Fintech Expansion

A fintech company plans to expand services to a Greylisted jurisdiction. Before proceeding, it evaluates the regulatory environment and implements additional compliance measures to address potential AML/CFT risks.

List of Countries on the FATF Greylist (as of February 21, 2025)

For the most current and official list of jurisdictions under increased monitoring, please refer to the FATF’s publication: Jurisdictions under Increased Monitoring – 21 February 2025.

Simple Analogy for FATF Greylist

Think of the FATF Greylist as a watchlist for countries. These nations are like students who need to improve their grades; they’re not failing but require extra attention and effort to meet the standards.

ELI5 (Explain Like I’m 5)

Imagine a group that checks if countries are playing fair with money. If a country isn’t doing a great job but promises to improve, it’s put on a special list to be watched closely until it gets better.

Stakeholders and Implementation

Governments: Work to strengthen their AML/CFT frameworks to be removed from the Greylist.
Financial Institutions: Adjust compliance procedures to manage risks associated with Greylisted countries.
Regulators: Monitor and guide institutions in implementing appropriate measures concerning Greylisted jurisdictions.
Businesses: Reassess partnerships and operations in Greylisted countries to ensure compliance and mitigate risks.

Challenges include:

Navigating increased compliance requirements.
Potential delays in transactions involving Greylisted countries.
Reputational risks associated with operating in or with entities from these jurisdictions.

Pros & Cons of the FATF Greylist

Pros:

Encourages countries to improve their financial systems.
Helps protect the global financial system from illicit activities.
Provides transparency and information for risk assessment.

Cons:

Can lead to economic and reputational damage for listed countries.
May result in reduced foreign investment and financial isolation.
Compliance burdens for businesses operating in or with Greylisted countries.

Future Outlook

The FATF continues to monitor and assess countries’ compliance with AML/CFT standards. Jurisdictions on the Greylist are expected to implement their action plans promptly. Successful reforms can lead to removal from the list, while failure to progress may result in further scrutiny or inclusion on the FATF Blacklist.