The Financial Action Task Force (FATF), the global money laundering and terrorist financing watchdog, issues public statements identifying jurisdictions with strategic AML/CFT deficiencies, as well as deficiencies related to combatting weapons of mass destruction proliferation financing (CPF).
Companies and financial institutions should consider the advice of the FATF when assessing jurisdictional risks and developing risk-based policies and procedures.
How does the FATF classify jurisdictions with deficiencies?
The FATF identifies:
- Jurisdictions under Increased Monitoring – jurisdictions that are actively working with the FATF to address deficiencies.
- High-Risk Jurisdictions Subject to a Call for Action – jurisdictions with significant deficiencies whereby FATF members are called on to apply enhanced due diligence or additional measures where required.
Jurisdictions under Increased Monitoring
When the FATF places a jurisdiction under increased monitoring, it means the country has committed to a swift resolution of the identified strategic deficiencies within agreed timeframes and is subject to increased monitoring. These jurisdictions are required to report their progress to the FATF.
As of November 2021, the following jurisdictions are under increased monitoring by the FATF:
On October 21, 2021, the FATF added Jordan, Mali, and Turkey to its list of the Jurisdictions under Increased Monitoring and removed Botswana and Mauritius.
High-Risk Jurisdictions Subject to a Call for Action
The FATF calls on members to apply enhanced due diligence to high-risk jurisdictions, and in the most serious cases, apply counter-measures to protect the international financial system from the money laundering, terrorist financing, and proliferation financing risks emanating from the jurisdiction.
At present, both the Democratic People’s Republic of Korea and Iran are listed as high-risk jurisdictions.
Counter-measures that may be taken against such jurisdictions include targeted financial sanctions.
The Financial Action Task Force identifies jurisdictions with deficiencies relating to anti-money laundering, counter-terrorism financing, and combatting weapons of mass destruction proliferation financing. Companies and financial institutions need to be aware of their obligations when dealing with such jurisdictions.