FATF May Exempt Lower Income Countries from Grey List Under Certain Circumstances

President of the Financial Action Task Force (FATF), “Elisa de Anda Madrazo” has announced significant modifications at “International Anti-Financial Crime Summit 2024 in London” about adding criteria of countries in the “grey lists.”

The most significant relief was decided for the countries that are lower income nations, specifically under the “$10 billion income threshold”; those countries will not be placed in grey lists of FATF in most scenarios, giving them a benefit.

Impact on lower-income countries

The new shift means that “poorer countries” will not be put under the title of countries that need to be monitored and supervised with an extra examination based on the risks related to money laundering (ML) or terrorist financing (TF).

The recently assigned president of the “Financial Action Task Force (FATF),” Elisa de Anda Madrazo, stated about new regulations that this decision would lead to a “significant decrease in a number of grey listed countries.”

Formalizing the Changes

De Anda, Following his opening remarks at the “International Anti-Financial Crime Summit 2024”, has announced that modification will be implemented legally in a “few weeks.”

“Unless other jurisdictions by consensus determine that this is a high-risk jurisdiction.” She added.

Purpose of change

The purpose of the change was to “Avoid penalizing lower-income countries,” as De Anda mentioned.

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Disadvantages of Being on the Grey List

The countries placed in FATF’s greylist face difficulties such as “lower international investment, or issues with borrowing from international markets.”

Changes in updated criteria will result in removing many countries that have already been placed on the greylist, and countries will comply with the newly announced framework.

De Anda stated, “We estimate a reduction of 47% in the number of countries being listed.”

“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,” de Anda further said.

New Standards for FATF Member States

Although De Anda stated that, in contrast to lower-income countries, the 40 countries that are considered “FATF member states” will face stricter rules and supervision.

The list is made of primarily “larger and weather nations such as the U.S., most EU countries, the UK, Japan and Singapore.”

She gave the following statements regarding the update and FATF members;

“If you’re a FATF member country and you meet the criteria for [grey list] referral, you will automatically enter the process,” she stated.

“A shorter observation period would be available to FATF members, as compared to low-capacity countries.”

“This is raising the bar for the membership and holding ourselves accountable.”

Extended Timeline for Countries in Debt Distress

According to the new criteria of FATF, countries that exceed the “$10 billion threshold” but are facing “stress of debt” will be considered poor countries, and they will get additional time before being put on the grey list of FATF.

Regarding this, De Anda stated. “You will have to double the time before being identified – 24 months instead of 12.”

The FATF president stated that changes are being finalized and are anticipated to be implemented in a few weeks, as per the sources.