AML: Insights From the FATF’s October Plenary Session

Last Friday, FATF concluded its most recent plenary under the new leadership of Elisa de Anda Madrazo from Mexico, marking notable advancements in anti-money laundering (AML), counter-terrorist financing (CFT), and counter-proliferation financing (CPF) strategies. Delegates from over 200 jurisdictions and observers from key international organizations participated in three days of discussions, which centered on the FATF’s efforts to enhance the efficiency and equity of its listing processes, improve support for least developed countries (LDCs) and implement reforms to address global financial crime risks.

Revised FATF Criteria for Listings and Focus on High-Risk Countries

One major outcome of the plenary was FATF’s announcement of updated criteria for placing countries on its grey and black lists. These revisions aim to reduce the burden on low-capacity and least developed countries while concentrating on jurisdictions that pose higher risks to the international financial system. Under these new criteria, the FATF will prioritise countries for review if they are high-income per the World Bank, FATF members, or have financial sectors with assets exceeding USD 10 billion. The updated approach means that LDCs will only be included in active monitoring if they present considerable money laundering (ML), terrorist financing (TF) or proliferation financing (PF) risks; otherwise, they are generally exempt. When LDCs do enter the review process, they will now have up to two years to address identified weaknesses, allowing them more time and support to build robust AML/CFT/CPF frameworks. The FATF expects this reform to decrease the number of low-capacity countries listed by nearly half in the upcoming evaluation cycle, reflecting a more targeted approach and aligning FATF’s mission with sustainable development objectives.

Completion of the Fourth Mutual Evaluation Round and New Round Focus

The plenary marked a milestone with the adoption of the final two mutual evaluation reports in FATF’s fourth assessment round. Argentina and Oman were the focus of these reports, which evaluated each country’s AML/CFT/CPF compliance levels and implementation. For Argentina, the joint assessment with GAFILAT acknowledged progress in strengthening its AML/CFT/CPF systems, particularly in domestic agency cooperation. However, Argentina was advised to further improve its prosecution rates, especially for ML linked to corruption and informal financial services and to enforce stronger financial sanctions related to PF risks. Similarly, Oman’s assessment, conducted in collaboration with MENAFATF, recognised its advances in using financial intelligence and implementing targeted sanctions but recommended more effective risk assessments, heightened ML investigations and increased oversight of legal entities to prevent misuse.

As the fourth cycle concludes, FATF will initiate a new evaluation round focused on more precise, risk-based mutual evaluations. These assessments aim to direct resources towards jurisdictions with heightened risk profiles, ensuring that those with strategic deficiencies receive targeted guidance to improve their financial safeguards.

Enhanced Global Inclusivity and Engagement with Guest Jurisdictions

A significant step toward expanding FATF’s global inclusivity was seen in the invitation of Senegal and the Cayman Islands to participate as guest jurisdictions in the plenary and Working Groups. This inclusion aligns with FATF’s commitment to increasing diversity and broadening regional representation within its decision-making processes. These jurisdictions will provide unique perspectives, which are especially valuable as FATF advances its outreach to areas less involved in FATF’s core operations. These invitations are part of a rotational, one-year program, which FATF envisions as a pathway to greater inclusion of non-member regions.

Progress in AML/CFT Monitoring: Jurisdictions Added and Removed

FATF updated its list of monitored jurisdictions, highlighting both achievements and challenges. Senegal, which made substantial progress on its Action Plan to address AML/CFT/CPF deficiencies, was removed from increased monitoring after a successful on-site review. However, the plenary added Algeria, Angola, Côte d’Ivoire and Lebanon to the list of jurisdictions under increased monitoring. Countries on this list work closely with FATF to resolve strategic deficiencies through an agreed Action Plan, with set timelines for reforms. This ongoing process is designed to strengthen global financial safeguards by encouraging compliance with FATF standards in high-risk areas.

Financial Inclusion and Revisions to Risk-Based Standards

Another key focus of the plenary was FATF’s push for financial inclusion through a revision of its risk-based standards, primarily affecting Recommendation 1. This move stems from FATF’s recent stocktake report, which identified unintended consequences of rigid compliance measures that restrict access to financial services in low-risk scenarios. The proposed revisions encourage flexibility, permitting simplified measures in lower-risk contexts to foster inclusion while maintaining essential safeguards. This approach supports balanced AML/CFT enforcement, helping countries tailor compliance frameworks to local needs and risks. FATF plans to finalise these revisions in 2025 after a public consultation period.

Cross-Border Payments, Terrorist Financing and Emerging Risks

In response to evolving international financial systems, FATF is revising its standards to accommodate changes in cross-border payments, recognising the growing importance of safe, efficient transactions in a globalized economy. The plenary also focused on updated measures for addressing emerging terrorist financing and proliferation financing risks, incorporating new insights to stay ahead of evolving threats. Additionally, the FATF is exploring means to enhance detection of financial flows tied to online child exploitation, a crime that has escalated with digital growth. This project aims to improve financial transaction monitoring to identify and prevent exploitation, thus enhancing protections for vulnerable populations globally.

Safeguarding Non-Profit Organizations and Ensuring Compliance Integrity

Another major initiative announced at the plenary addresses FATF’s commitment to ensuring that AML/CFT standards are not misused to restrict the activities of legitimate non-profit organizations (NPOs). FATF has started a project to develop processes and guidance to prevent the undue targeting of NPOs under its standards. This initiative aligns with FATF’s aim to strike a balance between mitigating financial crime risks and preserving essential civil society functions.

Ongoing Strategic Initiatives: National Risk Assessments, Data Privacy and Inclusivity

Recognising the core role of risk assessments, FATF introduced revised guidelines for national risk assessments, drawing on over a decade of global experience. This guidance aims to help jurisdictions of varying capacities better identify, assess and manage risks, facilitating resource allocation where it is most impactful. FATF also initiated projects focused on harmonising AML/CFT standards with data privacy laws, coordinating efforts with privacy experts, the private sector and international partners. The organisation is also building on previous diversity initiatives, such as the Women in FATF and Global Network (WFGN) program, which aims to boost gender diversity within the FATF and foster inclusivity. This year, FATF will roll out a second mentorship program to support the advancement of underrepresented groups within the organisation.

Russia’s Suspension and Continued Risk Vigilance

The plenary affirmed the ongoing suspension of the Russian Federation, first implemented in early 2024, following concerns about the circumvention of international financial restrictions. FATF advised all member jurisdictions to maintain vigilance against emerging risks from these activities, reinforcing the global financial system’s protection measures.

Integration of FATF Plenary Outcomes with cleversoft’s Jurisdiction Risk Monitoring and Assessment

cleversoft’s jurisdiction risk monitoring relies heavily on insights and updates from FATF’s actions, as FATF’s grey and black lists provide a critical foundation for identifying countries with strategic AML/CFT/CPF deficiencies. The recent FATF plenary session in Paris resulted in key changes to the list of jurisdictions under increased monitoring (often referred to as the grey list). FATF added Algeria, Angola, Côte d’Ivoire and Lebanon to this list, while removing Senegal after it successfully addressed previously identified deficiencies. These updates align with FATF’s broader strategic goal to focus on high-risk jurisdictions and those with sufficient capacity to undertake necessary AML/CFT reforms.

Implications for cleversoft’s Country Risk Assessment

For cleversoft’s jurisdiction risk monitoring and assessments, the FATF updates have the following specific impacts:

• New Grey-Listed Countries: Algeria, Angola, Côte d’Ivoire, and Lebanon are already classified as high-risk in cleversoft’s jurisdictional assessment due to additional risk factors captured in cleversoft’s proprietary risk matrix. Consequently, the recent FATF grey-listing does not alter their current risk levels within cleversoft’s risk monitoring framework.

• Senegal’s Status Update: While FATF removed Senegal from its grey list, indicating improvements in Senegal’s AML/CFT measures, as the European Commission continues to list Senegal as a high-risk third country, Senegal remains categorised as high-risk.

cleversoft Services

At cleversoft, we are dedicated to aligning with global AML/CFT standards to provide our clients with the most reliable and current risk assessment tools. Our commitment to supporting FATF initiatives means integrating these updated standards and methodologies into our solutions, ensuring you stay ahead in compliance and risk management. We celebrate the progress made in this Plenary and look forward to contributing to the continued global efforts under the new FATF leadership.

cleversoft remains your trusted compliance and regulatory partner committed to delivering the latest insights and developments.  We stand by your side ensuring that you are well-equipped to navigate these changes and make informed decisions in the ever-evolving regulatory world.

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FATF Plenary October 2024: Outcomes FATF Plenary, 23-25 October 2024