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Following its most recent plenary session, held in Paris from February 19-21, 2025, the Financial Action Task Force (FATF) has updated its list of jurisdictions under increased monitoring. It added Laos and Nepal to the so-called “grey list”, but removed the Philippines after an evaluation revealed it had made notable progress in combating financial crime.
Jurisdictions placed under increased monitoring work with FATF to address deficiencies in the way they apply anti-money laundering and counter-terrorism financing (AML/CTF) regulations.
Countries under increased monitoring have typically committed to implement an action plan to resolve those deficiencies within agreed timeframes.
Following the plenary session, FATF also launched a second round of public consultation on revisions to Recommendation 16 (R.16), its Interpretive Note (INR.16) and the related glossary-specific terms.
R.16 relates to the transparency of payments, and requires that providers of cross-border payment services include originator and beneficiary information in transfers.
The proposed changes are intended to ensure that FATF’s standards remain technology-neutral, as well as to help make cross-border payments faster, cheaper, more transparent and inclusive (while remaining safe and secure).
The feedback received from the public consultation will be considered when finalising the revisions. Stakeholders have until April 18, 2025 to respond.
The bigger picture
FATF plays a key role in the global fight against money laundering, terrorist financing and related threats to the integrity of the international financial system.
The movements on and off its grey list demonstrate the dynamic nature of global AML/CTF efforts, and the need for continuous monitoring and adaptation to regulatory changes.
The Philippines’ removal from the list is the culmination of efforts to strengthen its financial regulatory framework via its own action plan.
To stay off the list, it will need to ensure that its AML/CTF regulations remain at an adequate level and that it applies them effectively.
The grey list acts as a warning to potential investors and financial institutions (FIs) about the higher risks associated with the jurisdictions named.
Countries that are subject to increased monitoring by FATF face increased scrutiny and regulatory expectations.
Firms operating in grey-listed jurisdictions may need to review their transaction monitoring systems, update their risk assessments and ensure that staff are adequately trained to recognise and respond to the risks posed by these jurisdictions.
The advantage of moving off the grey list is that it signals increased confidence in the level of regulatory effectiveness.
The reduced level of perceived risk opens up countries for business, including for FIs. Delays are minimised and transactions can be processed more smoothly.
Escaping the grey list not only fosters a more functional business environment, but also increases the attractiveness of the relevant country as a place to operate.
Just as the Philippines prepares to benefit from its removal from the grey list, so Laos and Nepal must face the consequences of being added to the list of jurisdictions under increased monitoring.
Both have committed to working with FATF to implement action plans that address strategic deficiencies in their AML/CTF frameworks.
FIs currently operating in Laos and Nepal will need to assess the level of risk their presence in the countries brings, and consider whether it is worthwhile.
They may need to re-examine and possibly enhance their due diligence measures.
Enhanced due diligence (EDD) protocols help to ensure that business relationships or transactions involving these countries do not pose undue risk.
Why should you care?
The changes to FATF's grey list will create fresh opportunities and challenges for FIs operating in the relevant jurisdictions.
The Philippines may have become a more viable destination for FIs since its removal from the grey list, although organisations should naturally proceed with caution.
Firms must carefully consider the risks associated with grey-listed countries — now including Laos and Nepal — to avoid potential disruptions to their operations.
Being aware of the changes to the grey list also demonstrates a commitment to maintaining appropriate levels of AML/CTF compliance.
Rigorous application of AML/CTF best practice not only helps mitigate financial and reputational risk, but also contributes to efforts to combat financial crime.
FIs should use FATF’s guidance to refine and enhance their internal controls and procedures, and doing so is not only a regulatory obligation, but also provides an advantage in the interconnected global financial landscape.
However, FATF’s efforts to ensure the ongoing application of appropriate standards of AML/CTF regulation in jurisdictions around the world should be seen in the wider context of international relations.
The future of the multilateral international system and its institutions seems increasingly uncertain as the US changes tack under President Trump and pursues an “America First” approach.
Part of this policy is a withdrawal from international institutions that foster cooperation and set standards — the Trump administration has already issued executive orders withdrawing the US from the World Health Organisation (WHO) and certain UN organisations.
FATF was clear that Russia’s membership is still suspended, and urged jurisdictions to remain vigilant against risks related to sanctions evasion and illicit finance, yet the US is apparently looking to rebuild relations with the rogue state.
The US has traditionally taken a central role in tackling money laundering worldwide. Its Bureau of International Narcotics and Law Enforcement Affairs (INL) says it “works in global and regional forums to negotiate, assess, and promote effective implementation of international standards”.
Part of the INL’s role is to represent the US in FATF, and it provides technical assistance to other countries in implementing AML/CTF best practices.
However, the suspension of the Foreign Corrupt Practices Act will affect the regard in which the US is held. Should it lead to a significant slide in the way US businesses and individuals conduct their affairs, we may start to hear suggestions — previously unthinkable — of the country finding its way onto the grey list.
For all the optimism in the Philippines at making it off the grey list and the determination in Laos and Nepal to implement their action plans, the future of the rules-based global order seems precarious, and FIs need to factor that into their decision-making.
