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 FATF is worried about the DPRK’s failure to address significant AML/CFT deficiencies, which pose a severe threat to the global financial system. The FATF urges the DPRK to take immediate and effective measures to improve its AML/CFT practices. Furthermore, the FATF has serious concerns about the DPRK’s illicit activities involving the proliferation of weapons of mass destruction and their financing.
To protect their financial sectors from ML/TF risks from the DPRK, the FATF advises its members to give special attention to business relationships and transactions with DPRK entities, including companies and financial institutions. Additionally, the FATF urges its members and all jurisdictions to apply targeted financial sanctions, and to close existing branches, subsidiaries, and representative offices of DPRK banks within their territories.
Iran
In June 2016, Iran committed to resolving its strategic deficiencies, but failed to complete its action plan by January 2018 when the action plan expired. In response, the FATF called upon its members and jurisdictions to implement counter-measures, including increased supervisory examination for branches and subsidiaries of financial institutions based in Iran, introducing enhanced reporting mechanisms, and requiring enhanced external audit requirements for financial groups with branches and subsidiaries in Iran.
Due to Iran’s failure to enact the Palermo and Terrorist Financing Conventions in accordance with the FATF Standards, the FATF has fully lifted the suspension of countermeasures. Iran will remain a high-risk jurisdiction until it has completed the full action plan. The FATF will decide on next steps, including whether to suspend countermeasures, if Iran ratifies the Palermo and Terrorist Financing Conventions in line with the FATF standards. Until then, the FATF remains concerned about the terrorist financing risk originating from Iran and the potential danger it poses 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 improving its AML/CTF deficiencies, but its action plan expired in September 2021. As Myanmar has not made sufficient progress, the FATF calls on its members and other jurisdictions to apply proportionate enhanced due diligence measures. Myanmar should continue to work on its action plan, which includes improving its understanding of ML risks, conducting risk assessments, enhancing the use of financial intelligence in investigations, effectively investigating and prosecuting ML, improving international cooperation, and increasing the freezing/seizing and confiscation of criminal proceeds. Myanmar will remain on the list of countries subject to a call for action until it completes its full 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.
