The Financial Action Task Force (FATF) establishes guidelines for a cohesive worldwide approach to prevent money laundering and terrorist financing. It oversees jurisdictions to ensure their complete and efficient implementation of the FATF Standards.
The FATF identifies jurisdictions with strategic deficiencies in their anti-money laundering and counter-terrorist financing (AML/CFT) regimes. Such jurisdictions may be classified as being:
- Under increased monitoring.
- High-risk jurisdictions.
High-risk jurisdictions have significant strategic deficiencies in their AML/CTF regimes. For all countries identified as high-risk, the FATF calls on all members and urges all jurisdictions to apply enhanced due diligence, and, in the most serious cases, countries are called upon to apply counter-measures such as targeted financial sanctions to protect the international financial system from the money laundering and terrorist financing (ML/TF) risks emanating from the country.
The FATF outlines which jurisdictions are classified as high risk and are subject to a call for action.
Democratic People’s Republic of Korea (DPRK)
The Financial Action Task Force (FATF) has consistently highlighted the Democratic People’s Republic of Korea’s (DPRK) failure to address deficiencies in its anti-money laundering (AML) and combating the financing of terrorism (CFT) regime. The DPRK’s illicit activities related to weapons of mass destruction (WMDs) proliferation pose serious threats. Since 2011, the FATF has urged countries to implement targeted financial sanctions as per UNSC Resolutions and take countermeasures such as terminating relationships with DPRK banks, closing DPRK bank branches, and limiting financial transactions with DPRK persons. Despite these measures, the DPRK has increased its connectivity with the international financial system, raising proliferation financing risks. The FATF calls for enhanced vigilance, due diligence, and assessment of these risks, particularly in light of the recent termination of the 1718 Committee Panel of Experts mandate. The FATF will continue to monitor compliance with targeted financial sanctions and the implementation of countermeasures against the DPRK.
Iran
In June 2016, Iran committed to addressing its strategic deficiencies in its financial system, but its action plan expired in January 2018 without completion. By February 2020, the FATF noted that Iran had not fulfilled the plan. In October 2019, the FATF urged increased scrutiny and reporting of financial transactions involving Iran and heightened external audit requirements for financial groups with branches or subsidiaries in Iran. Due to Iran’s failure to enact the Palermo and Terrorist Financing Conventions per FATF standards, the FATF has lifted the suspension of countermeasures and calls for effective countermeasures in accordance with Recommendation 19. Iran remains listed as a high-risk jurisdiction until it completes its Action Plan. The FATF will reassess if Iran ratifies the required conventions but remains concerned about the terrorism financing risk from Iran and its threat to the international financial system.
Myanmar
While the DPRK and Iran are subject to a call by the FATF on its members and other jurisdictions to apply countermeasures, with regards to Myanmar, the FATF calls for enhanced due diligence.
In February 2020, Myanmar committed to addressing its strategic deficiencies in anti-money laundering (AML) and combating the financing of terrorism (CFT), but its action plan expired in September 2021 without sufficient progress. By October 2022, with most action items still unaddressed, the FATF called for enhanced due diligence measures for Myanmar, urging financial institutions to closely monitor transactions and ensure legitimate financial flows are not disrupted. If no progress is made by October 2024, countermeasures will be considered.
Myanmar’s slow progress includes needed improvements such as understanding money laundering risks, registering hundi operators, using financial intelligence in law enforcement, investigating and prosecuting money laundering, international cooperation on transnational cases, freezing and confiscating criminal proceeds, managing seized assets, and addressing compliance deficiencies related to financial sanctions. The FATF urges Myanmar to fully address these deficiencies to avoid undue scrutiny of legitimate financial activities. Myanmar remains on the FATF’s list of countries subject to a call for action until it completes its action plan.
Key takeaways
Countries with significant strategic deficiencies in their AML/CFT regimes may be classified by the FATF as high-risk and subject to countermeasures or enhanced due diligence measures. The FATF calls on its members and other jurisdictions to apply countermeasures to the Democratic People’s Republic of Korea and Iran, and to apply enhanced due diligence to business relations and transactions with Myanmar.
The FATF urges these countries to take immediate and effective measures to improve their AML/CFT practices and complete their action plans. The FATF will continue to monitor these countries and take necessary action to protect the international financial system from the ML/TF risks emanating from these jurisdictions.
