High-risk and non-cooperative jurisdictions

The absence of the necessary measures to combat money laundering or terrorist financing in a country’s regime can make them extremely vulnerable to these illicit activities.  That risk extends to any financial transaction involving that country, whether it is inside or outside its borders.

Between 2000 and 2006, the FATF conducted the process on non-co-operative countries and territories (NCCTs).  During this process, 23 jurisdictions were listed due to a lack of an effective AML/CFT system.  The process was highly successful, all of the 23 jurisdictions that had been identified as NCCTs in 2000 and 2001, made significant progress.  The last country was removed from the list in October 2006.

Jurisdictions are considered as high-risk and non-cooperative when they have detrimental rules and practices in place which constitute weaknesses and impede international co-operation in the fight against money laundering and terrorism financing.

Since 2007, the FATF has continued its International Co-operation Review Group to analyse high-risk and non-cooperative jurisdictions and recommend specific action. In 2008, the FATF issued a series of statements expressing concerns about the AML/CFT deficiencies in Iran, Uzbekistan, Pakistan, Turkmenistan, São Tomé and Principe, and the northern part of Cyprus. The statements called on FATF members and urged all jurisdictions to pay special attention to transactions dealing with Iran and Uzbekistan and to strengthen preventive measures in response to the risks associated with these countries. All FATF members and many other jurisdictions took action to advise their financial institutions of these risks. In February 2009, the FATF called on its members and other jurisdictions to apply additional counter-measures to protect their financial sectors from money laundering and terrorist financing risks emanating from Iran. The situation will continue to be monitored so that further action can be taken, as necessary, to protect the international financial system.

Most of these jurisdictions have taken at least some steps towards implementing AML/CFT systems. In October 2008 the FATF publicly recognised the progress made in the northern part of Cyprus.

The FATF began strengthening its procedures to respond to high-risk jurisdictions in 2008; this process was reinforced with the call of the G20 on a number of international bodies, including the FATF, for fortified action in response to the global financial and economic crisis. In June 2009, the FATF adopted new procedures for identifying non-cooperative and high-risk jurisdictions and started the process of reviewing the AML/CFT regimes of a limited number of jurisdictions. The process includes direct engagement with the jurisdictions under review. After reviews are completed, jurisdictions found to be high-risk or non-cooperative at that time will be publicly identified. This would be accompanied by an FATF call on members and other jurisdictions to apply enhanced scrutiny when dealing with transactions involving the identified jurisdictions. In addition to enhanced scrutiny, the FATF will, if necessary, ultimately call for the application of appropriate counter-measures in order to protect the financial system.