TerM

Greylisting

TerM

Greylisting

Introduction

The Financial Action Task Force (or FATF) is an intergovernmental organization dedicated to monitoring and preventing global money laundering (AML), terrorism financing (CFT), and other financial crimes. To that end, it maintains lists of countries based on their compliance with its AML/CFT recommendations, and how committed they are to meeting and maintaining those standards.

In addition to a whitelist (full compliance) and blacklist (insufficient compliance), the FATF also has a greylist. This is for countries that don’t currently fully meet the FATF’s AML/CTF criteria, but are making sincere efforts to reform their institutions, laws, and procedures to comply with FATF best practices.

First off: what is greylisting in relation to finance and the FATF? Also, how does it differ from placement on the FATF’s other lists?

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What is Greylisting?

Greylisting, in financial terms, is when the Financial Action Task Force (FATF) puts a country under stricter economic monitoring and regulation. It signifies the country does not completely meet the FATF’s standards for fighting money laundering and terrorist financing, but is earnestly trying to.

Greylisting, Blacklisting, and Whitelisting: The Differences

Countries on the FATF blacklist and greylist do not currently meet the organization’s guidelines for AML/CFT. So the decision to financially greylist vs. blacklist a country comes down to whether it is making a noticeable effort to improve its AML and CFT programs to meet FATF criteria.

In contrast, the decision to financially greylist vs. whitelist a country is not as contingent on a country’s efforts to address its AML and CFT issues. This is because countries on both the FATF’s greylist and whitelist are committed to either improving or maintaining their action plans for AML and CFT in order to meet FATF benchmarks. The question is whether or not a country’s programs are currently up to FATF specifications.

So, to sum up the differences between whitelisting vs. blacklisting vs. greylisting:

  • Blacklist: A country does not meet FATF standards for AML and CFT programs, and is not making any noticeable effort to improve towards meeting those benchmarks.
  • Whitelist: A country’s AML and CFT programs are compliant with FATF guidelines, and the country is actively working to maintain this compliance.
  • Greylist: A country is working with the FATF to develop better action plans for AML and CFT, but does not currently meet the FATF’s criteria.

Note that despite their cooperation with the FATF to improve their financial accountability, greylisted countries can still be subjected to international sanctions like most blacklisted countries are.

How Does Greylisting Work?

The FATF chooses to put countries on its whitelist, greylist, or blacklist based on periodic rounds of evaluations. These assessments gauge how well a country is adhering to the FATF’s AML/CFT framework. As a summary of the full methodology, these analyses judge compliance based on two key dimensions.

Technical

The technical component evaluates whether or not a country has implemented institutions, laws, and procedures for fighting money laundering and terrorist financing that align with the FATF’s benchmark criteria. Generally, for each criterion, a country is given one of four ratings: compliant, largely compliant, partially compliant, or non-compliant.

Effectiveness

The effectiveness component measures how much impact a country’s institutions, laws, and procedures have on curbing money laundering and terrorism financing. It’s less a checklist of whether certain systems are in place and more a judgment on if the operation of those systems is meeting the FATF’s goals. 

These objectives are based on a hierarchy of 11 immediate outcomes that serve 3 intermediate outcomes, which are aimed towards the high-level objective of securing a country’s finances and economy against money laundering and terrorism financing.

What is FATF Greylisting?

The FATF greylist denotes countries that do not meet the FATF’s minimum standards for AML and CFT, but are cooperating with the organization to reach those benchmarks. These countries are put under increased economic supervision and regulation. 

It is a less severe version of the FATF’s blacklist, which is for countries with inadequate AML and CFT programs that are not making any significant attempts to address those shortcomings.

The FATF is an important organization for financial institutions to pay attention to, for two major reasons. 

First, it provides up-to-date advice on how to detect and prevent fraud, money laundering, and other financial crimes that could be used towards terrorism or other criminal activity. 

Second, it identifies countries that are at a greater risk of financial crimes because of insufficient regulations and enforcement. This can be helpful when deciding whether to do business with a person or company from a particular nation.

FATF Greylist Countries List

The FATF greylists countries that are not currently compliant with its AML and CFT recommendations, but are making an honest attempt at compliance. However, the dynamic nature of this process – not to mention the FATF’s standards periodically changing in response to global conditions – means that FATF greylist countries may not always stay on the greylist. They may eventually reach the FATF’s benchmarks and be promoted to the whitelist, or their efforts or systems may lapse to the point where they’re demoted to the blacklist.

The point is that the greylist is subject to change, and is updated frequently to add or remove countries. As of October 21, 2022, the following 23 countries and territories are on the greylist:

  • Albania
  • Barbados
  • Burkina Faso
  • Cambodia
  • Cayman Islands
  • Democratic Republic of the Congo
  • Gibraltar
  • Haiti
  • Jamaica
  • Jordan
  • Mali
  • Morocco
  • Mozambique
  • Panama
  • Philippines
  • Senegal
  • South Sudan
  • Syria
  • Tanzania
  • Turkey
  • Uganda
  • United Arab Emirates
  • Yemen

Monitor the FATF’s Greylist with Unit21’s Compliance Solutions

The FATF whitelist, greylist, and blacklist are handy tools in stopping fraud and money laundering before they start. They reveal in which countries there’s a greater (or lesser) risk of dealing with bad financial actors. This allows a company to choose business partners with greater prudence.

Remember, though, that some countries may be working towards meeting or maintaining the FATF’s AML/CFT benchmarks more diligently than others. And the FATF’s guidelines may periodically change to reflect new developments in the ongoing struggle against financial crime. So countries may occasionally move between the whitelist, greylist, and blacklist.

A robust anti-fraud and AML compliance program can help to simplify staying on top of which countries are or aren’t under increased FATF scrutiny. Contact Unit21 today to see what our solutions can do for your business.

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