Finance Series: The FATF’s Relationship with Developing Countries

Written by: Claire Kefeero (W’25)

The Financial Action Task Force (FATF) is an intergovernmental organization that looks to put a stop to money laundering and terrorist financing on an international level. Countries that are unable to successfully implement strategies to fight these financial issues are either greylisted or blacklisted. However, a majority of the countries that are on these watch lists are developing nations. This fact brings into question whether or not the FATF is targeting certain nations and being stricter on them compared to their more developed counterparts.

The FATF was created in 1989 during the G7 Summit in Paris. They specifically analyze countries' efforts to mitigate money laundering and terrorist financing through their 40 Recommendations. These recommendations are set up as a comprehensive plan for all countries to follow if they want to curb money laundering and terrorist financing. Each recommendation lists out detailed ways in which countries can be financially safe. Countries who fail to do so are either blacklisted or greylisted. This label is given to certain countries that are unable to properly implement procedures to promote financial safety. The implications of being either blacklisted or greylisted are very detrimental to the economic health of a country as that status would mean they’d have limited access to international funding.

As of February 2023, the three countries currently on the blacklist are North Korea, Myanmar, and Iran. There are 23 countries on the greylist with a majority of those countries being African nations like Nigeria, Uganda, and Burkina Faso. Most of these countries on both the greylist and the blacklist are still developing and working on implementing strong financial structures that will mitigate money laundering and terrorist financing. The methods they have in place are not as advanced and strong as those of countries like the United States or England. For example, Yemen is one of the countries on the greylist. Though they have implemented the action plan that the FATF required of them, the unsafe situations in the country have not made it possible for there to be on-site visits to see if these implementations are working. The greylist implies that there is some level of defiance when it comes to creating regulations. That isn’t true in the case of Yemen, seeing as the reason why they are on the greylist is out of their hands.

The FATF mission has great importance to the economic safety of the world as money laundering and terrorist financing are major threats. However, the countries they seem to target for their blacklist and greylist tend to be developing countries that are still trying to navigate how to create strong financial institutions and systems. The FATF should make more of an effort to help these nations develop these institutions, so they too can interact with other financially stable nations. 

FATF. (2023, February 24). Jurisdictions under Increased Monitoring - 24 February 2023. www.fatf-gafi.org. Retrieved March 25, 2023, from https://www.fatf-gafi.org/en/publications/High-risk-and-other-monitored-jurisdictions/Increased-monitoring-february-2023.html