FATF Grey List

What Is the FATF Grey List?

The FATF grey list is the informal name for the Financial Action Task Force's public list of "Jurisdictions under Increased Monitoring". A country on this list has strategic deficiencies in its regime for combating money laundering, terrorist financing and proliferation financing, but has made a high-level political commitment to fix them within agreed timeframes and is working through an action plan with the FATF.

The grey list is distinct from the FATF's other public list, "High-Risk Jurisdictions subject to a Call for Action", often called the blacklist. Jurisdictions on that list have serious deficiencies and the FATF calls on its members to apply enhanced due diligence and, in the most serious cases, countermeasures. Grey-listed countries, by contrast, are actively cooperating to address the problems identified.

The FATF updates both lists after each of its plenary meetings, which take place three times a year. The current lists are published on the FATF website.

Why the Grey List Matters

Grey listing is a public signal that a jurisdiction's AML and counter-terrorist financing framework does not yet meet international standards. For financial institutions, it is a direct input to country risk.

The practical effects include:

• Customer and country risk scoring: a link to a grey-listed jurisdiction typically raises the risk rating of a customer, a transaction or a correspondent relationship.
• Enhanced due diligence triggers: in some legal frameworks, inclusion on a high-risk list leads to mandatory enhanced measures.
• Correspondent banking: banks review relationships with respondent banks in listed countries more closely, and some reduce exposure.
• Cost and access to finance: businesses in listed jurisdictions may face slower payments, more documentation requests and higher costs.

For the listed country, there is a strong incentive to complete the action plan and be removed.

How Countries Get On and Off the List

Identification

A country is usually considered for review following its mutual evaluation, the peer review in which assessors rate its technical compliance with the FATF Recommendations and the effectiveness of its system. Poor results across a defined set of ratings can trigger review by the FATF's International Co-operation Review Group (ICRG). Countries may also be nominated for review on other grounds.

Action plan

A jurisdiction that is grey-listed agrees an action plan with the FATF or a FATF-style regional body. The plan sets out specific deficiencies to address, such as weak supervision of a sector, limited use of financial intelligence, gaps in beneficial ownership transparency or ineffective confiscation of criminal proceeds.

Progress reporting

The country reports on its progress, and the FATF publishes an updated statement on each listed jurisdiction after every plenary.

Removal

When the FATF judges that the action plan has been substantially completed, it conducts an on-site visit to confirm that reforms are in place and being implemented. If the visit confirms progress, the country is removed from the list at a subsequent plenary.

Regulatory Expectations

The FATF itself does not call for enhanced due diligence to be applied to grey-listed jurisdictions. It encourages its members and all jurisdictions to take the information into account in their risk analysis. How that translates into firm-level obligations depends on national law:

• European Union: the European Commission maintains its own list of high-risk third countries with strategic deficiencies, adopted by delegated regulation and informed by FATF publications. Obliged entities must apply specified enhanced due diligence measures to business relationships and transactions involving those countries.
• United Kingdom: the Money Laundering Regulations 2017 require enhanced due diligence for business relationships and transactions involving a high-risk third country, and UK legislation identifies those countries by reference to the FATF lists.
• United States: FinCEN publishes advisories after FATF plenaries informing financial institutions of changes to the FATF lists and of how to reflect them in their risk-based programs.

Firms are generally expected to document how list changes feed into their country risk methodology, customer risk ratings and monitoring.

Common Challenges

• Keeping lists current: the lists change several times a year, and internal country risk tables, screening rules and EDD triggers need updating each time.
• Different lists in different jurisdictions: a group may need to follow the FATF lists, the EU list and national lists at the same time, and these do not always align.
• Proportionality: treating every customer with a link to a grey-listed country as high risk can be excessive. Supervisors generally expect a risk-based assessment rather than blanket exits.
• Indirect exposure: grey-list risk can appear through beneficial owners, counterparties, source of funds or trade routes, not just the customer's address.
• Delisting: when a country leaves the list, firms should consider whether risk ratings and controls applied because of the listing should be reassessed.

Best Practices

• Assign ownership for reviewing FATF publications after each plenary and recording any changes.
• Map grey-listed and blacklisted jurisdictions into the country risk model with documented reasoning.
• Apply jurisdiction checks to nationality, residence, incorporation, beneficial owners and payment corridors.
• Avoid wholesale de-risking. Assess customers individually and record the outcome.

How on8.ai Helps

SmartSanction brings sanctions, PEP and risk screening of people, companies, vessels and addresses together in one service, with an ownership and relationship graph that helps reveal links to higher-risk jurisdictions through beneficial owners. Each result explains why it matched, which supports documented risk decisions.

Related Terms

• FATF (Financial Action Task Force)
• EDD (Enhanced Due Diligence)
• Risk-Based Approach (RBA)
• Correspondent Banking
• De-Risking
• Geo-Blocked Jurisdictions