Argentina Faces FATF Scrutiny Despite Avoiding Grey List

Argentina remains under the spotlight of the Financial Action Task Force (FATF) after being placed on “enhanced follow-up,” a status requiring the country to report back to the organization in one year with evidence of improvements in its anti-money laundering (AML) regime.

Although the FATF announced in October that Argentina had avoided being placed on the grey list, the country’s current status highlights ongoing challenges in addressing money laundering risks. President Javier Milei’s administration publicly celebrated the decision to avoid the grey list, as being included would have dealt a significant blow to Argentina’s economy, already strained by high inflation.

However, the designation of “enhanced follow-up” indicates that the FATF believes Argentina’s AML framework still contains critical gaps.

The FATF’s latest mutual evaluation report, which assesses Argentina’s AML measures, noted significant progress since the previous evaluation in 2010. Nevertheless, the report identified persistent shortcomings.

“Argentina faces shortcomings in delivering effective outcomes, apart from cooperation with international partners where it is achieving positive results,” the report stated.

The FATF explained that Argentina will now be subject to enhanced monitoring, meaning it must provide updates more frequently than countries under regular review, which report every three years. The organization warned that failure to make satisfactory progress could result in additional disciplinary measures, potentially culminating in grey listing.

Grey listing identifies jurisdictions with insufficient AML measures and often leads to severe economic consequences, including reduced international investment. Financial institutions are typically required to implement enhanced screening procedures when dealing with such jurisdictions.

Among the issues highlighted in the FATF report are the risks of money laundering stemming from corruption and informal financial services.

“Argentina must also increase prosecution of money laundering and improve confiscation in line with its risk profile,” the report said.

The report pointed out that while authorities have secured 91 convictions, this number is considered low for a country of Argentina’s size and context. Although confiscations were achieved in nearly all cases, the amounts were described as modest.

Regarding terrorist financing, the report noted, “Argentina has a generally adequate regulatory framework, but the limited number of investigations, lack of prosecutions and the absence of convictions is not entirely consistent with the country’s medium-low risk profile and should improve.”

The FATF emphasized that continued efforts are necessary to address these deficiencies and ensure Argentina’s AML framework aligns with international standards. Failure to make meaningful progress could lead to harsher consequences, underscoring the urgency of the situation for the Milei administration.

By fLEXI tEAM