With great power – to name and shame – comes great responsibility
The group also wields enormous power through its various country listings, the dreaded “blacklist” saved for the worst of the worst and the more populated, but equally reviled and feared “grey list.”
Since February 2020, the group has kept its blacklist in a form of stasis due to the COVID-19 pandemic, with only Iran and North Korea populating the dungeon.
The grey list, or “jurisdictions with strategic deficiencies,” on the other hand, is arguably the more feared list because it touches countries with a broader reach when it comes to touchpoints with the international financial system.
To get on this list means other countries, particularly large financial centers, would perceive these jurisdictions as higher risk, potentially making their banks jump through more hoops for relationships or correspondent connections.
Here is the current incarnation of the grey list, with FATF most recently adding Haiti, Malta, Philippines, and South Sudan:
- Burkina Faso
- Cayman Islands
- South Sudan
As a point of context, Malta being mentioned in the same breath as Yemen, Syria and South Sudan – countries rocked by strife, terror attacks and a teetering financial sector – has been an ongoing embarrassment for Europe.
That is further compounded by Danske Bank scandal, which saw Denmark’s largest lender facing a plethora of probes, investigations, accusations and recriminations in several countries for its monitoring, reporting and handling of some 200 billion euros, or more than $224 billion, in potentially suspicious transactions tied to Russia between 2007 and 2015.
The scandal has sacked some top leaders at banks in Denmark and Sweden, snared Deutsche Bank and even cast regulators in the regions in harsh lights, even as these financial watchdogs work to levy statement-making penalties against the institutions involved.
Not surprisingly, the EU Commission and Parliament have voiced concerns and put forth formal measures to create a pan-bloc AML enforcement body that would put member state regulators, not just banks, in the hot seat for compliance failures.
Staying in FATF’s good graces is a massive endeavor, for even large countries with strong AML rules, big enforcement actions under their belts and investigative wins.
Those efforts must run in parallel to FATF-reviewed countries – along with responding to group evaluators – as regions must also craft countrywide fincrime risk assessments, a herculean task that further lays bare longstanding weaknesses.
Even so, a country not being on the list doesn’t mean a rosy fincrime compliance outlook.
Case in point: Germany.
The country routinely scores highly on FATF recommendations and is the engine of the bloc’s economy, but has had in recent years to juggle some scandals of its own, including a fumbling financial intelligence unit, that was recently raided by authorities, and the still simmering Wirecard scandal.
The accounting debacle has in some media outlets been referred to as the “Enron of Germany,” with the implosion of the payment processor and financial services firm also bringing scrutiny and accusations to the country’s financial regulator, BaFin, and longtime Big Four auditor, Ernst & Young.