FATF Unveils New Rules for Deciding How Countries are ‘Grey-listed’

•Nigeria, S’Africa, 10 other African countries still on grey list

Ndubuisi Francis in Abuja

The Financial Action Task Force (FATF) has unveiled new rules for deciding how countries are included in its ‘Grey List’.

FATF is the global money laundering and terrorist financing watchdog, which sets international standards that seek to prevent these illegal activities and the harm they pose to society.

A country on grey list is under increased monitoring by the FATF due to certain deficiencies in its anti-money laundering (AML) and Combatting the Financing of Terrorism (CFT) and proliferation financing (CPF) framework.

Nigeria was on February 24, 2023 placed on the FATF grey list due to a rise in capital inflows and deficiencies in combating money laundering, terrorism, and arms financing.

Eleven other African countries, including Sputh Africa, are still on the FATF greylist.

The 12 African countries on on the grey list represent approximately 57 per cent of all grey-listed countries globally.

The biggest change in the FATF rules is that countries below a $10 billion income threshold will not be grey listed in most circumstances.

This means that poorer countries will be less likely to get the designation, which sees them placed under special scrutiny due to money laundering or terrorist financing concerns.

FATF President, Elisa de Anda Madrazo who unveiled the new rules at the ‘International Anti-Financial Crime Summit 2024’ in London, United Kingdom, said the new measures will likely cause a significant reduction in the number of ‘grey-listed’ jurisdictions.

She added that the changes are expected to be formalized “in a couple of weeks”.

“If you’re a low income jurisdiction as defined by the IMF – if your income is below $10 billion – you won’t go into identification.

“Unless, other jurisdictions by consensus determine that this is a high-risk jurisdiction,” she said.

Countries which are above the “$10 billion threshold”, but which are in “high debt distress” or are still recognised as a poorer jurisdiction, will also get extra time before being greylisted.

“You will have double the time before being identified – 24 months instead of 12,” de Anda said.

The FATF President said the changes were being fine-tuned and were expected to be finalized “in a couple of weeks.”

De Anda stated that the move was aimed at avoiding penalising lower income countries.

Being greylisted often causes a country to face problems such as lower international investment, or issues with borrowing from international markets.

The FATF boss said the change would mean that many jurisdictions which are currently on the grey list would no longer meet the criteria.

““We estimate a reduction of 47% in the number of countries being listed.

“It means that many jurisdictions which have their challenges,  but are not intricate to the financial system, won’t have to struggle with an identification that brings its own consequences,” de Anda said.

However, she said that standards were being raised for the 40 jurisdictions which are full FATF member states.

These consist mostly of larger and wealthier nations, such as the U.S. most EU countries, the UK, Japan and Singapore.

“If you’re a FATF member country and you meet the criteria for grey list referral, you will automatically enter the process.

“A shorter observation period would be available to FATF members, as compared to low-capacity countries.”

“This is raising the bar for the membership and holding ourselves accountable,” she said.

The FATF identifies jurisdictions with weak measures to combat money laundering and terrorist financing (AML/CFT) in two FATF public documents that are issued three times a year.

The FATF’s process to publicly list countries with weak AML/CFT regimes has proved effective.

As of June 2024, the FATF had reviewed 133 countries and jurisdictions and publicly identified 108 of them.

Of these, 84 have since made the necessary reforms to address their AML/CFT weaknesses and have been removed from the process