FATF Announces Major Changes to Grey-Listing Criteria, Exemptions for Lower-Income Countries

The Financial Action Task Force (FATF) has unveiled significant changes to how countries are added to its grey list, which subjects jurisdictions to enhanced scrutiny over money laundering and terrorist financing risks. The most notable reform is the introduction of an income threshold, meaning that countries with incomes below $10 billion will generally not be added to the grey list.

This new policy is aimed at reducing the burden on poorer countries, which are often disproportionately affected by grey-listing. Elisa de Anda Madrazo, the newly appointed president of the FATF, announced the changes during her Opening Address at the ‘International Anti-Financial Crime Summit 2024’. She noted that the revisions are expected to lead to a substantial decrease in the number of grey-listed jurisdictions.

“If you’re a low-income jurisdiction as defined by the IMF – if your income is below $10 billion – you won’t go into identification,” de Anda told the summit. “Unless other jurisdictions by consensus determine that this is a high-risk jurisdiction.”

The new rule, she explained, is intended to prevent penalizing low-income countries, as grey-listing often leads to economic difficulties, such as reduced foreign investment and challenges in securing international loans.

“We estimate a reduction of 47% in the number of countries being listed,” de Anda revealed. “It means that many jurisdictions which have their challenges, but are not intricate to the financial system, won’t have to struggle with an identification that brings its own consequences.”

These changes are expected to be formalized in the coming weeks. Many of the jurisdictions currently on the grey list will no longer meet the criteria under the new framework.

At the same time, de Anda emphasized that the FATF will be tightening standards for its 40 member jurisdictions, which consist mainly of larger, wealthier nations such as the United States, most EU countries, the UK, Japan, and Singapore.

“If you’re a FATF member country and you meet the criteria for [grey list] referral, you will automatically enter the process,” de Anda said. She added that FATF member countries will face a shorter observation period compared to lower-capacity nations, further raising the bar for member states.

“This is raising the bar for the membership and holding ourselves accountable,” de Anda remarked.

In addition, countries that exceed the $10 billion income threshold but are facing "high debt distress" or are still recognized as poorer jurisdictions will be granted additional time before being grey-listed. These nations will have a 24-month observation period instead of the usual 12 months.

De Anda concluded by stating that the FATF is fine-tuning these changes, which are expected to be finalized “in a couple of weeks.”

By fLEXI tEAM