FATF amends AML deficiency criteria to ease pressure on less developed countries
The list of jurisdictions under increased monitoring identifies strategic deficiencies in jurisdictions' AML regimes and sets out action plans to remedy them. However, countries in the developing world have warned that the process is burdensome and expensive and have noted that they suffer financially if they are put on the 'grey list' even for a short period.
FATF has now responded by changing the criteria by which it chooses jurisdictions for active review. The new criteria will be used in the next round of mutual evaluation reports, which begin this year. A jurisdiction that is a 'least developed country' as defined by the United Nations will not be ear-marked for active review unless FATF agrees that it poses a significant money laundering, terrorist financing or proliferation financing risk. Any 'least developed countries' that do enter the review process may be granted a longer than usual observation period to make progress against their Key Recommended Action roadmap. They will still have to provide a progress update to the FATF assessment body after the first year.
FATF member jurisdictions will be prioritised for active review if they meet the referral criteria and are on the World Bank high-income countries list or have financial sector assets above USD10 billion, unless they are a 'least developed country'.
FATF anticipates that these reforms could reduce by half the number of low-capacity countries being listed in the upcoming assessment cycle.
The amended guidance puts more emphasis on risk-based policymaking. It will focus on the highest-risk jurisdictions whose AML assessments are most outdated or that face higher risks, as well as those with the most active financial centres. The round of mutual evaluations based on the 2023 methodology will be a six-year cycle, shorter than previous rounds.
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