The Financial Action Task Force (FATF) has introduced new criteria for its greylist which could significantly reduce the number of countries included on the list.
Announcing the changes via its website, the G7 financial crime and anti-money laundering initiative stated that it wishes to relieve pressure on least developed countries and instead focus on nations which pose ‘greater risks to the international financial system’.
Countries will be assessed against three criteria to be listed on the greylist. Nations must be an FATF member country, be listed on the World Bank High-Income Countries list, and/or have financial sector assets above more than US$10bn measured by ‘broad money’.
Any country classified as a ‘least developed country’ under United Nations (UN) definitions will not be prioritised for an active FATF review, which occurs when a country is placed on the greylist for being financially unsound.
However, least developed countries could still find themselves on the list in the event the FATF agrees that a significant money laundering, terrorist financing or proliferation financing risk exists – though even if they do end up on the greylist they could be given a longer observation period than others, such as a two-year observation period.
The new criteria will be applied during the next round of FATF assessments, and so could result in some countries being removed from the greylist or fewer countries being added to it. The FATF itself expects that the reforms will halve the number of ‘low-capacity countries’ listed.
The FATF statement read: “The changes made by the FATF will ensure the listing process better targets the countries that pose the greatest risk to the international financial system and contributes to more adequate support to low-capacity countries.”
As it stands, the FATF greylist consists of Bulgaria, Burkina Faso, Cameroon, Croatia, the Democratic Republic of Congo, Haiti, Jamaica, Mali, Mozambique, Nigeria, Philippines, Senegal, South Africa, South Sudan, Syria, Tanzania, Türkiye, Vietnam and Yemen.
The GT AML and CTF initiative also maintains a separate ‘blacklist’ of high-risk jurisdictions, which currently only has three countries on its books – Iran, Myanmar and North Korea.
A look at the greylist shows that a significant percentage of listed countries are classed as developed according to UN standards. The FATF is concerned that these countries’ presence on the list could hold back economic development.
“The impact of illicit financial flows is felt most strongly by the least developed countries as it impedes sustainable development,” the FATF explained.
“Proceeds of crimes, such as tax evasion, corruption and organised crime, divert billions of dollars annually away from essential public goods like education and health.
“Depriving criminals from their ill-gotten gains is crucial to help these countries build robust economies and societies.”
AML, gambling and finance
Some more developed nations have been placed on the list in recent memory, however.
According to the FATF’s latest statement, it is these nations which may find themselves at greater risk of going back on the list, due to the notion that they have a bigger impact on the global financial market.
Four countries were removed from the FATF greylist this year, including the UAE and the UK Crown Dependency of Gibraltar. The latter is notable as a significant jurisdiction in the gaming sector, with several prominent bookmakers registered on the island.
The UAE meanwhile, is one of the biggest Middle Eastern nations with a prominent role in global finance, with cities such as Abu Dhabi and Dubai significant business and retail centres. The country is also in the process of investing in its financial sector across a range of areas, including cryptocurrency and digital assets.
In a similar story to Gibraltar, Malta was also placed on the FATF greylist back in 2021 but was able to remove itself from the list one year later by achieving the objectives of its assigned action plan.
Like Gibraltar, Malta has a lot of significance in the gaming sector but also in finance and payments, with the country’s last National Risk Assessment (NRA) noting the significance of banking to its economy.
Luis Perez, Chief AML Officer at Lottofy, the brand name of Clobet Limited, told Payment Expert earlier this year that the FATF greylisting represented a ‘before and after’ moment for Malta and its gaming and finance sectors.
“The greylisting highlighted serious deficiencies in Malta’s anti-money laundering measures, leading to increased monitoring, restricted cross-border transactions, difficulties in obtaining credit and reduced foreign investment,” Perez remarked.
“This had a profound impact on Malta’s economy, particularly its igaming sector, which constitutes around 12% of the country’s GDP.”
The changes in the FATF’s greylisting could prove to be a gamechanger for a number of jurisdictions, both in a positive and negative sense, in the development of high-risk sectors like finance, fintech, banking and gambling within these countries.