The recent Financial Action Task Force (FATF) plenary held from June 28-26, 2024, marked the sixth session under the stewardship of T. Raja Kumar during the two-year Singapore Presidency.

Delegates from the FATF’s Global Network, representing over 200 jurisdictions and international organizations, gathered in Singapore for three days of discussions on crucial issues related to money laundering, terrorism financing, and proliferation financing.

The FATF removed two countries from its increased monitoring list after successful on-site evaluations and updated its statements on high-risk and other monitored jurisdictions. The organization reiterated its concerns about the Democratic People’s Republic of Korea (DPRK) and its ongoing failure to address major deficiencies in its anti-money laundering and combating the financing of terrorism (AML/CFT) regime, as well as the serious threats posed by its illicit activities related to weapons of mass destruction proliferation and financing.

In line with its focus on risk and context, the FATF achieved a significant strategic milestone by revising the criteria for prioritizing countries under its International Cooperation Review Group (ICRG) process (known as the grey or blacklisting process). These updates will be applied in the next evaluation round, making the process more risk-based and considerate of the capacity challenges faced by the least developed countries.

But let’s find out, together, all the news from the FATF Plenary June 2023.
Stay tuned and keep reading for knowing more! (and if you want to read more about the FATF Plenary in February, read our article).

Why FAFT plenary is so important?

First of all, let’s talk about FAFT.

The Financial Action Task Force (FATF) plays a crucial role in the global financial system. Here’s why it is so important:

1. Setting International Standards

The FATF sets international standards for combating money laundering, terrorism financing, and other related threats to the integrity of the international financial system. These standards provide a framework that countries around the world adopt to safeguard their financial systems.

2. Ensuring Global Compliance

The FATF monitors the implementation of its standards across its member countries and jurisdictions. By conducting evaluations and assessments, the FATF ensures that countries comply with its recommendations, thereby maintaining a consistent and effective global approach to financial crimes.

3. Enhancing Security

By fighting money laundering and terrorism financing, the FATF enhances global security. Preventing these illicit activities disrupts criminal networks and reduces the funding available for terrorist activities, thereby contributing to global stability and peace.

4. Promoting International Cooperation

The FATF fosters international cooperation among its member countries. By sharing information and best practices, countries can work together more effectively to combat transnational financial crimes. This cooperation is vital in a globalized world where financial transactions cross borders easily.

5. Protecting the Integrity of the Financial System

The FATF’s work helps maintain trust in the global financial system. By ensuring that financial institutions implement robust anti-money laundering (AML) and combating the financing of terrorism (CFT) measures, the FATF protects the integrity of financial markets and prevents abuse by criminals.

6. Adapting to Emerging Threats

The FATF continuously updates its standards to address new and emerging threats. This adaptability ensures that its guidelines remain relevant and effective in tackling the evolving tactics of financial criminals, such as those related to virtual assets and cryptocurrencies.

7. Supporting Economic Stability

A strong AML/CFT framework helps promote economic stability. By preventing the infiltration of illicit funds into the financial system, the FATF helps create a level playing field for businesses and fosters a healthy economic environment.

FATF’s Grey List June 2024: what changed for the last one?

Changes to the Grey List

  • Monaco: Monaco has been added to the grey list due to inadequate progress in addressing illicit financial flows. Despite adopting nine new AML laws since 2022, issues remain such as ineffective prosecution of complex money laundering cases, insufficient beneficial ownership checks, and a weak sanctions regime. The country’s AML body, Autorité Monégasque de Sécurité Financière (AMSF), needs to improve its practices significantly. Monaco’s government has expressed a commitment to implement the latest FATF recommendations and aims to be removed from the grey list.
  • Venezuela: Venezuela was added to the grey list due to high money laundering risks from its large informal economy and concerns over terrorist financing linked to its economic ties with Tehran. The country has agreed to implement an FATF action plan which includes enhancing the understanding of ML/TF risks, ensuring that financial institutions and designated non-financial businesses adhere to AML/CFT measures, improving beneficial ownership information, and strengthening its financial intelligence unit.

Countries Removed from the Grey List

  • Jamaica: Jamaica has been removed from the grey list after addressing various AML/CFT deficiencies identified in 2020. The country developed a comprehensive understanding of its ML/TF risks, increased the use of financial information, and implemented targeted financial sanctions for terrorist financing. Moving forward, Jamaica plans to regulate virtual assets, make non-profit organization registration mandatory, and address proliferation financing sanctions.
  • Türkiye: Türkiye has been removed from the grey list following improvements in AML/CFT supervision and the implementation of a new cryptocurrency law. This law requires crypto asset service providers to obtain permission from the Capital Markets Board (SPK) and enhances penalties for non-compliance. These steps have significantly boosted international confidence in Türkiye’s financial sector and economic infrastructure.

Revised ICRG Criteria
The FATF has approved new criteria for the International Cooperation Review Group (ICRG) process, which identifies countries with significant AML/CFT deficiencies. The revised criteria, set to be implemented in the next assessment cycle, aim to make the evaluation process more risk-based and consider the capacity challenges of the least developed countries. This update is part of broader efforts to refine and make the FATF’s listing procedure more equitable and transparent.

Methodology Revisions
The FATF has also revised its methodology for assessing countries’ compliance with updated standards related to asset recovery and international cooperation. These revisions, adopted in October 2023, focus on ensuring that countries prioritize asset recovery and facilitate timely international cooperation. Countries must demonstrate their ability to trace and confiscate criminal assets and work constructively with international partners to combat financial crimes.

Mutual Evaluation Reports

  • India: India’s mutual evaluation report praised its high compliance with FATF standards and effectiveness in areas such as understanding ML/TF risks and international cooperation. However, the report recommended improvements in supervising non-financial sectors, prosecuting ML/TF cases more timely, and tailoring CTF measures for the non-profit sector.
  • Kuwait: Kuwait’s evaluation highlighted a robust legal framework for combating ML/TF/PF but noted significant weaknesses in achieving effective outcomes. Recommendations include deepening the understanding of ML/TF risks, strengthening investigations and prosecutions related to terrorism financing, and ensuring quick legal freezing of assets linked to terrorism or WMD proliferation.

Strategic initiatives from the FAFT: next steps

Existing Initiatives

  1. DNFBP Compliance Review: The FATF completed its review of measures to prevent gatekeepers (accountants, lawyers, real estate agents, trust, and company service providers) from facilitating money laundering and terrorist financing. Findings will be published in July 2024.
  2. Virtual Assets Standards Update: The fifth annual update on the progress of jurisdictions in implementing FATF Standards for virtual assets and service providers will be published in July 2024. Despite some progress, most jurisdictions remain partially or non-compliant, leaving them vulnerable to misuse. The FATF urges swift and full implementation of these standards.
  3. Payment Transparency Revision: The FATF is updating standards to align with changes in cross-border payment systems and industry standards like ISO 20022. Further discussions with experts are needed before finalizing the amendments to make payments faster, cheaper, and more transparent.
  4. Global Network Cooperation: During the FATF-FSRB Annual High-Level Meeting, progress was discussed on implementing the 2022 Strategic Vision for the Global Network. Agreed priorities for the coming year include:
    • Increasing participation of FATF-Style Regional Bodies (FSRB) in FATF work.
    • Preparing for new mutual evaluations.
    • Strengthening regional AML/CFT expertise.
  5. Women in FATF and the Global Network Initiative: As part of this initiative, Singapore’s Minister Indranee Rajah launched the e-book “Breaking Barriers: Inspiring the Next Generation of Women Leaders,” supporting women leaders and enhancing the multicultural mentoring program.

Priorities of the Incoming Mexican Presidency
Ms. Elisa de Anda Madrazo of Mexico will assume the FATF Presidency from July 1, 2024, to June 30, 2026. Her priorities include:

  • Promoting financial inclusion by implementing risk-based standards proportionally.
  • Assisting in the effective implementation of revised FATF standards, focusing on asset recovery, beneficial ownership, and virtual assets.

Next Steps

Compliance staff should:

  • Familiarize themselves with the outcomes of the June plenary, especially regarding upcoming mutual evaluation reports (MERs) in their operating countries.
  • Update risk scores for countries newly added to or removed from the grey list, applying appropriate due diligence.

Upcoming Events
The next FATF plenary will take place in October 2024. Firms should note dates for forthcoming FATF guidance, which will shape future national regulatory approaches.