The FATF plays a key role in work on anti-money laundering and combating the financing of terrorism (AML/CFT) by establishing international standards and regularly publishing lists of those countries deemed not to be making enough effort in these areas.
For nationals of these countries and French nationals living in countries on the black or grey lists, the consequences of FATF regulations in terms of their assets are not insignificant. If you are a resident of one of these countries, one practical consequence is the extreme difficulty, if not impossibility, of obtaining a property loan. So it is worth being fully informed of the situation to avoid unpleasant surprises, including when planning to take out a loan, for example.
What is money laundering?
Money laundering aims to give an appearance of legitimacy to money that, in actual fact, comes from unlawful activities (drug trafficking, crime, corruption, earnings from prostitution, arms dealing, etc.). Money laundering is closely linked to the financing of terrorism, in that it provides or pools funds likely to be used in connection with terrorist activities.
Money laundering also describes more broadly funds that are linked to criminal offences, such as tax evasion.
What is the FATF?
The Financial Action Task Force (FATF) is an inter-governmental organisation the role of which is to produce international standards and develop domestic and international policies against money laundering and combating the financing of terrorism (AML/CFT), and also the proliferation of weapons of mass destruction.
The FATF notably issued Forty Recommendations on Money Laundering, which were revised in 2012, and nine Special Recommendations on Terrorism Financing.
These recommendations taken together constitute a comprehensive framework of measures covering the criminal justice system and the application of law, the financial system and regulations, and international cooperation that countries are requested to endorse. The goal is to help them to:
- Identify the risks and develop policies and coordination at a national level
- Act against money laundering, terrorism financing and WMD proliferation
- Implement preventative measures for the financial sector and other named sectors
- Give the authorities (such as those responsible for investigations and pressing criminal charges, and regulators), the necessary power and responsibility, and set up other institutional measures
- Improve transparency and the availability of information on the beneficial owners of legal persons and other legal structures
- Facilitate international cooperation.
As each country has its own legal, administrative and operational framework and its own financial system, the FATF’s recommendations are intended to create international standards that countries can implement to suit their own circumstances.
How the blacklist works
As well as the international standards framework, the FATF also publishes a document entitled the “FATF Public Statement” three times a year, which lists the states considered to be a high risk and/or non-cooperative as a result of strategic deficiencies in their anti-money laundering and combating the financing of terrorism mechanisms.
Designated countries are put on the FATF blacklist, deemed “high-risk jurisdictions” and the entire international community is called upon to apply “counter-measures”, meaning restrictions or sanctions intended to be gradual and proportionate, to encourage the countries in question to do their utmost to quickly improve their application of the FATF recommendations.
In 2020, the FATF blacklist was just two countries, namely Iran and North Korea.
How the greylist works
Along with the blacklist, the FATF publishes a greylist, designating countries deemed to be “monitored jurisdictions”, meaning that after analysing the measures taken by the country, the FATF has concluded that strategic deficiencies do exist in anti-money laundering and combating the financing of terrorism (AML/CFT).
The entire international community is called upon to apply additional due diligence while a given country remains on the greylist.
In 2020, the list of countries deemed to be “jurisdictions with strategic deficiencies” and consequently on the FATF greylist consists of Albania, the Bahamas, Barbados, Botswana, Cambodia, Ghana, Iceland, Jamaica, Mauritius, Mongolia, Myanmar, Nicaragua, Pakistan, Panama, Syria, Uganda, Yemen and Zimbabwe.
To be delisted from the greylist, the country can put an “action plan” in place to ensure its compliance with the recommendations, and then request a fresh analysis of its situation.