What are FATF-identified Jurisdictions?

The Financial Action Task Force (FATF) is an international policy-making and standard-setting body dedicated to tackling money laundering, terrorist, and proliferation financing. It is a global money laundering and terrorist financing watchdog that sets international standards that aim to prevent these illegal activities and the harm they cause to society. The FATF constantly identifies and appraisals jurisdictions with strategic AML/CFT deficiencies that present a risk to the international financial system.

ICRG:

The FATF’s International Co-operation Review Group (ICRG) analyses high-risk jurisdictions and recommends specific actions to be taken to address the risks emanating from them. The monitoring process began in 2007 and was enhanced in 2009. It was further updated in 2015 to take into account revisions to FATF standards and the mutual evaluation process, which assesses the effective implementation of AML/CFT measures. Four regional Joint Groups of the ICRG carry out the reviews, covering: Africa, the Americas, Asia/Pacific, and Europe/Eurasia/Middle East and North Africa. Each jurisdiction under review has the opportunity to participate in a face-to-face meeting to discuss the analysis of the Joint Group in advance of FATF plenary meetings.

FATF-Style Regional Bodies (FSRBs):

The main task of FSRBs is to set up systems for combating money laundering, financing of terrorism, and proliferation in their respective regions. The FSRBs conduct evaluations of the AML/CFT systems of the member states and make recommendations for their improvement.

The FATF reviews jurisdictions based on threats, vulnerabilities, or particular risks arising from the jurisdiction. Specifically, jurisdiction will be reviewed when:

1. It does not participate in a FATF-style regional body (FSRB) does not allow mutual evaluation results to be published promptly; or
2. It is nominated by a FATF member or an FSRB. The nomination is based on specific money laundering, terrorist financing, or proliferation financing risks or threats coming to the attention of delegations; or
3. It has achieved poor results on its mutual evaluation, specifically:
4. it has 20 or more non-compliant (NC) or Partially Compliance (PC) ratings for technical compliance; or
5. it is rated NC/PC on 3 or more of the following Recommendations: 3, 5, 6, 10, 11, and 20; or
6. it has a low or moderate level of effectiveness for 9 or more of the 11 Immediate Outcomes, with a minimum of two lows; or
7. it has a low level of effectiveness for 6 or more of the 11 Immediate Outcomes.

A jurisdiction that enters the ICRG review process as a result of its mutual evaluation results has a one-year Observation Period to work with the FATF or its FATF-style regional body (FSRB) to address deficiencies before possible public identification and formal review by the FATF. The FATF then prioritises the review of those countries with more significant financial sectors – e.g. USD 5 billion or more in financial sector assets.

The review process of FATF deliberates the strategic AML/CFT deficiencies identified both in terms of technical compliance and effectiveness of measures in place, and any relevant progress made by the jurisdiction. In case the FATF thinks that the progress is insufficient to address its strategic deficiencies, the FATF develops an action plan with the jurisdiction to address the remaining strategic deficiencies. For all countries under ICRG review, the FATF requires a high-level political commitment that the jurisdiction will implement the legal, regulatory, and operational reforms required by the action plan.

The FATF publishes two statements at the end of each plenary meeting, in February, June, and October. These statements provide a summary of the recent actions taken by each jurisdiction’s action plan, as well as a list of the strategic deficiencies remaining to be addressed. The two statements reflect the different levels of risk posed at any given time by the deficiencies in the jurisdictions under review. For example, Jurisdiction under Monitoring in June 2024 named Monaco and Venezuela are made subject to increased monitoring and Jamaica and Turkeiye are removed from subject to increased monitoring by the FATF.

For a country removed from FATF monitoring, a jurisdiction must address all or nearly all the components of its action plan. Once the FATF has determined that a jurisdiction has done so, it will organise an on-site visit to confirm that the implementation of the necessary legal, regulatory, and/or operational reforms is underway and there is the necessary political commitment and institutional capacity to sustain implementation. If the on-site visit has a positive outcome, the FATF will decide on removing the jurisdiction from public identification at the next FATF plenary. The concerned jurisdiction will then continue to work within the FATF or the relevant FSRB, through its normal follow-up process, to improve its AML/CFT regime.

Major Source: FATF website

Related Posts: