AML High-Risk Countries

Anti-Money Laundering/Counter-Terrorism Financing (AML/CFT) laws obligate businesses to identify, assess and understand the money laundering risks to which they may be exposed. However, these rules vary by jurisdiction. 

The Financial Action Task Force (FATF) is a recognized international watchdog that combats financial crime in more than 200 countries. As such, the FATF identifies countries with significant deficiencies in their anti-money laundering (AML) and counter-terrorist financing (CFT) regimes by conducting evaluations—the results of which affect each country’s reputation in the global financial system. 

The FATF helps distinguish between ‘low-risk’ and ‘high-risk’ countries. In turn, this helps companies determine how to best deal with clients from certain jurisdictions, if at all. The FATF’s latest country report was published in June 2024. 

We at Sumsub prepared this article to provide a comprehensive overview of the FATF’s country-level risk assessment. Plus, we explain how to deal with clients and companies coming from higher-risk jurisdictions.

How does the FATF define ‘high risk’? 

The FATF is an international body identifying countries with strategic AML/CFT shortcomings. . It compiles multiple lists, such as the High-Risk Jurisdictions Subject to a Call for Action and Jurisdictions under Increased Monitoring, which are updated three times a year. 

“High-risk” countries are those with significant deficiencies in their money laundering countermeasures, a significant level of corruption according to the Transparency Index list, among other fundamental issues. In turn, these countries are subject to increased monitoring and are specially-designated by governments and international bodies, landing on the FATF’s “greylist” and “blacklist”, the Basel AML Index, and the high-risk country ratings of European Union, United Kingdom and the United States.

FATF guidelines on high-risk jurisdictions

The FATF divides countries with strategic shortcomings in their AML/CTF regimes into two lists: High-risk Jurisdictions Subject to a Call for Action (“blacklist”) and Jurisdictions Under Increased Monitoring (“greylist”).

The FATF “blacklist”: High-risk Jurisdictions Subject to a Call for Action.

When dealing with countries on this list, the FATF calls on all members to apply EDD measures to protect the international financial system from ML/TF risks. 

The FATF “greylist”: Jurisdictions Under Increased Monitoring.

When the FATF places a jurisdiction under increased monitoring, it means the country has committed to resolve its strategic shortcomings within agreed timeframes and is subject to increased monitoring. The FATF welcomes the progress made by “greylist” countries in combating money laundering and doesn’t impose tough sanctions on them. However, these countries may still face economic sanctions from institutions like the International Monetary Fund (IMF) and the World Bank, and experience adverse effects on trade. In any case, regulated financial institutions, such as banks, need to be closely monitored in such countries.

Countries are regularly added to the greylist, while those that successfully address their shortcomings are removed.

Suggested read: Understanding the FATF Black and Grey Lists in 2024

What are the high-risk jurisdictions in 2024?

The following countries are currently ‘blacklisted’ by the FATF:

• Democratic People’s Republic of Korea
• Iran
• Myanmar

The following countries are ‘greylisted’ by the FATF:

• Bulgaria
• Burkina Faso
• Cameroon
• Croatia
• Democratic Republic of Congo
• Haiti
• Kenya
• Mali
• Monaco
• Mozambique
• Namibia
• Nigeria
• Philippines
• Senegal
• South Africa
• South Sudan
• Syria
• Tanzania
• Venezuela
• Vietnam
• Yemen

Monaco and Venezuela are new additions to the greylist, while Turkey and Jamaica have been removed. Monaco is now part of the list as it failed to show a significant improvement since its review by MONEYVAL in 2022. At the same time, Venezuela is experiencing a high volume of illegal mining and terrorist financing threats. By contrast, Turkey and Jamaica showed clear developments in the implementation of AML regulations. 

All in all, high-risk country ratings help businesses determine risks associated with customers, corporate customers, and transactions. In turn, this helps businesses take necessary precautions.

How to protect your business

Regulated financial institutions are legally required to follow international and local AML/CTF standards. This means obtaining the full range of required information and identifying all relevant risk factors before commencing a business relationship—and applying additional CDD measures if needed.

It’s necessary to apply Enhanced Due Diligence (EDD) measures in business relationships and transactions involving high-risk third countries. This requirement is common for all high-risk third countries, however the scope of the EDD measures necessary may vary.

When companies deal with customers from high-risk third countries, they should be aware that:

• High-risk countries may be subject to financial sanctions, which require companies to take additional measures
• Regulators worldwide require companies to apply EDD measures in any transaction or business relationship with a person established in a high-risk third country

However, this doesn’t mean that customers from high-risk countries are automatically involved in criminal activities; rather, they indicate higher risk factors that warrant closer attention.

Also, companies are required to assess risk factors related to suspicious customer interactions from high-risk countries by:

• Applying a risk-based approach to determine whether enhanced due diligence is required
• Screening sanctions lists, global watchlists, Politically Exposed Persons (PEPs) lists, adverse media, and other similar sources

Suggested read: Understanding the UN Sanctions

Enhanced Due Diligence is an in-depth verification procedure for high-risk situations (i.e. dealing with customers from high-risk countries, PEPs, cross-border correspondent relationships with a third-country, high transaction amounts, etc.). It requires additional checks, such as verification of sources of wealth and funds.

Frequently Asked Questions

What countries are blacklisted for money laundering?

The FATF’s blacklist includes:

• Democratic People’s Republic of Korea
• Iran
• Myanmar

What countries are low risk for AML?

Any country that doesn’t fall into the blacklist and greylist—for example, Germany and Italy. Yet, to be certain, it’s essential to conduct risk assessments.

FAQ

• What are high-risk industries in terms of AML?

  Based on the FATF’s guidance, certain industries are considered higher risk for money laundering and terrorist financing. While the FATF does not provide an explicit list of ‘high-risk industries’, they do highlight sectors that require enhanced due diligence and monitoring. Here are some of the industries generally considered high-risk in AML compliance:

  • Banking and financial services

  • Casinos and gambling

  • Precious metals and stones dealers

  • Real estate

  • Virtual assets and cryptocurrencies

  • Money services businesses, Including currency exchanges and money transfer services

  • Legal and accounting services

  • Art and antiquities dealers

  • Non-profit organizations

  • High-value goods dealers

• What countries are blacklisted for money laundering?

  The FATF’s blacklist includes:

  • Democratic People’s Republic of Korea

  • Iran

  • Myanmar

• What countries are low risk for AML?

  Any country that doesn’t fall into the blacklist and greylist—for example, Germany and Italy. Yet, to be certain, it’s essential to conduct risk assessments.

Suggested read: Customer Risk Assessment—All You Need to Know