News From the FATF: an Update on High-Risk Jurisdictions
On the 21st of October 2021, FATF members met in the fifth Plenary session, the meeting under President Marcus Pleyer held every four months to work on a risk-based approach. On this occasion, the FATF (Financial Action Task Force) reviewed the situation of Botswana and Mauritius, declaring that they no longer belong to the enhanced surveillance list.
What are the FATF lists of jurisdictions?
The FATF classifies countries with AML/CFT implementation gaps into two jurisdictions:
High-risk and therefore blacklisted jurisdictions: these are countries with serious strategic AML/CFT deficiencies.
Jurisdictions on the grey list: they represent all countries under enhanced monitoring. They are actively working with the FATF to implement a strategy to overcome their AML/CTF deficiencies.
What is the impact?
As regarding the countries on the blacklists, the FATF recommends heightened vigilance. As a matter of fact, it is crucial to implement countermeasures against all countries in this list to limit the impact of money laundering that could damage the international financial system.
Countries in the grey list are deficient in their AML/CFT framework, and it is recommended not to have a business relationship with them. Of course, this has a negative impact on their reputation and credibility and significant economic repercussions on their companies. Therefore, supported by the FATF, they need to implement AML/CFT measures to comply with the recommended criteria to get off this list.
All countries included on blacklists or grey lists must follow the FATF guidelines and recommendations, an international standard that governments can implement and adapt to their own situation.
Positive outcomes for Mauritius and Botswana, removed from FATF’s Grey List
Mauritius was put under the grey list by FATF in February 2020, which significantly impacted its credibility as compliant jurisdiction. As a result, the European Commission included Mauritius on the EU AML list of high-risk third countries (blacklist). Following this, several working groups were established in the country, aiming to improve the compliance level of AML/CFT.
Since February 2020, Mauritius has put in place all necessary measures to tackle the deficiencies identified by the FATF by developing a national action plan. The progress of the local government had already been approved by the FATF during the Plenary Session of June 2021, and confirmed during the on-site inspection carried out in September 2021. Thus, ultimately, Mauritius moved off the grey list in October 2021.
The removal of Mauritius from the FATF's grey list is the positive result of reasonable efforts undertaken by Mauritian authorities to investigate and prosecute money laundering. In particular, this reflects:
improved risk recognition capabilities in medium- and high-risk sectors by local investigative authorities,
greater national and international cooperation,
greater capacity for anti-money laundering supervision of the global commercial sector and increased support for supervision of the non-financial sector.
Finally, the FATF decision has paved the way for the EU and the UK to remove Mauritius from their blacklist. Also, it has undoubtedly contributed to a better global view of the country as an ideal location for cross-border investment in Asia and Africa. This will reposition Mauritius as a leading jurisdiction in the global financial services sector.
Likewise, FATF recognized Botswana's significant progress in improving its AML/CFT regime. The country strengthened the effectiveness of its AML/CFT framework by addressing related technical deficiencies that FATF had identified in 2018.
Botswana submitted to the Eastern and Southern Africa Anti-Money Laundering Group (ESAAMLG, an affiliate member of the FATF) to meet its action plan commitments in December 2020. A review of Botswana's progress in addressing previously identified technical compliance deficiencies was then conducted, and technical compliance re-ratings were further requested to remove the state from the EU blacklist and the FATF grey list.
In January 2021, ESAAMLG released a report on Botswana's progress, which highlighted the positive outcome the State was achieving concerning some deficiencies.
The resulting delisting is a significant achievement in terms of restoring confidence and integrity to the country's financial system. The Minister of Finance and Economic Development claimed to be more than satisfied with the efforts made over the past three years, and she is certain of the confidence investors will repose in the State. The President of Botswana encouraged the country to maintain its strong political will to combat money laundering, terrorist financing, and proliferation financing. As such, Botswana will continue its collaboration with ESAAMLG to further improve its AML/CFT system.