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- Russia's actions run counter to FATF principles, body says
- Morocco, Cambodia off greylist, South Africa and Nigeria added
The international standard-setting body has decided to suspend Russia’s membership as a result of its year-long aggression against Ukraine while announcing updates to its “greylist”.
During its plenary meeting, the Financial Action Task Force (FATF) said it strongly condemns Russia’s war against Ukraine, which “unacceptably run counter to the FATF core principles aiming to promote security, safety, and the integrity of the global financial system”.
These actions represent “a gross violation of the commitment to international cooperation and mutual respect upon which FATF members have agreed to implement and support the FATF standards”, the body said, justifying the decision.
FATF expressed its support for Ukraine as soon as Russia invaded the country more than a year ago. Since then, the body has reiterated its support in every plenary session, each time imposing stricter restrictions on Russia’s authorities within the body.
In June 2022, FATF banned Russia from holding leadership roles or taking part in decision-making on any standard-setting, governance and membership matters.
As the war continued, in October, FATF barred Russian representatives from participating in FATF project teams and other “FATF-style” regional meetings as FATF members.
FATF has now decided to suspend Russia’s membership.
This is the first time the body has made such a step during its 34-year-long history. With Russia, FATF has 39 members, including 37 jurisdictions, the European Commission and the Gulf Cooperation Council.
The group stated that despite the suspension, Russia will remain a member of the FATF global network as an active member of the Eurasian Group on Combating Money Laundering (EAG) and retain its rights as an EAG member.
It also stressed that Russia must continue to meet its financial obligations and FATF will monitor the situation to see whether there is grounds for lifting the restrictions.
Greylist movers: Morocco, Cambodia, South Africa and Nigeria
During the plenary, FATF also updated its list of jurisdictions under increased monitoring, also known as the greylist.
It added South Africa and Nigeria to the list, meaning that the body found strategic deficiencies in their anti-money laundering regimes. Both countries have committed to resolving those weaknesses swiftly.
South Africa’s greylisting is the result of the country’s poor compliance with FATF standards.
In 2021, South Africa was found non-compliant with 20 out of the 40 global standards and undertook to make 67 recommended actions to fix those issues.
Although the country has made significant progress since then, there are still eight strategic deficiencies that need to be fixed, which the country agreed to make by January 2025.
In a fact sheet published following the announcement, the South African Treasury said the FATF greylisting mainly involves reputational damage, although it may have an impact on cross-border transactions, particularly via correspondent banking.
Certain EU directives require financial institutions to carry out higher levels of customer due diligence in transactions with firms in greylisted countries, which typically means more thorough processing and vetting of clients and understanding the sources of their funds.
The South African government stated it recognises the importance of addressing these issues, which is “consistent with our existing commitment to rebuild the institutions that were weakened during the period of state capture, the effectiveness of which is essential to addressing crime and corruption”.
Nigeria, which is currently holding an intense presidential election, has not issued a statement on the announcement.
Meanwhile, FATF has removed Cambodia and Morocco from the greylist, stating that both countries have addressed the strategic deficiencies previously identified by the body.
Morocco’s government welcomed the removal, stating it "will have a positive impact on sovereign ratings and local banks’ ratings" and "will strengthen Morocco’s image and its positioning in negotiations with international financial institutions, as well as the confidence of foreign investors in the national economy”.
