The Financial Action Task Force (FATF) is an international organization that sets standards and promotes effective implementation of legal, regulatory, and operational measures to combat money laundering, terrorist financing, and other related threats to the integrity of the international financial system. FATF periodically publishes a list of jurisdictions that are identified as having strategic deficiencies in their anti-money laundering and counter-terrorist financing (AML/CTF) regimes. This list is commonly referred to as the “FATF-identified jurisdictions” or “FATF blacklist.”
It’s important to note that the FATF does not maintain a specific list related to banknotes. Instead, its focus is on the overall AML/CTF framework and the effectiveness of measures in place to combat financial crimes. However, the jurisdictions identified by FATF may have implications for banks and financial institutions operating within those jurisdictions, including their handling of banknotes. Some of the key aspects that FATF assesses in relation to these jurisdictions include:
- AML/CTF Legal Framework: FATF evaluates the adequacy and effectiveness of a jurisdiction’s laws and regulations in combating money laundering and terrorist financing activities. This includes the criminalization of money laundering, customer due diligence requirements, reporting suspicious transactions, and seizing and confiscating illicit proceeds.
- Regulatory and Supervisory Framework: FATF assesses the regulatory and supervisory measures in place to ensure compliance with AML/CTF requirements. This includes the effectiveness of oversight and supervision of banks, financial institutions, and other relevant entities, as well as the enforcement actions taken against non-compliant entities.
- International Cooperation: FATF considers the level of cooperation and collaboration of a jurisdiction with other countries, particularly in sharing information, coordinating investigations, and extraditing individuals involved in money laundering or terrorist financing activities.
- Risk Assessment and Mitigation: FATF evaluates a jurisdiction’s understanding of its money laundering and terrorist financing risks and the measures it has implemented to mitigate those risks. This includes conducting national risk assessments, implementing risk-based approaches, and applying enhanced due diligence for higher-risk customers and transactions.
- Financial Intelligence Units (FIUs): FATF assesses the effectiveness of a jurisdiction’s FIU, which is responsible for receiving, analyzing, and disseminating suspicious transaction reports and other financial intelligence. The FIU plays a critical role in identifying and combating money laundering and terrorist financing activities.
The jurisdictions identified by FATF as having strategic deficiencies are subjected to increased scrutiny and international pressure to enhance their AML/CTF regimes. Financial institutions, including banks, operating within these jurisdictions may face additional compliance requirements, restrictions on correspondent banking relationships, and reputational risks.
It’s important for banks and financial institutions to stay updated on the FATF’s publications and take appropriate measures to ensure compliance with AML/CTF requirements, regardless of the jurisdictions in which they operate.