Bulgaria Added to FATF's Watchlist as Other Nations Make Progress

In a surprising move, the European Union member state Bulgaria has been added to the Financial Action Task Force's (FATF) watchlist. This development has raised questions about Europe's relationship with FATF and how the new EU Anti-Money Laundering Authority (AMLA) will engage with the global financial crime watchdog based in Paris.

The decision to add Bulgaria to the watchlist came on the same day when FATF removed Panama, the Cayman Islands, Albania, Jordan, and Ukraine from its "grey list." Notably, despite pressure from Ukraine, FATF did not blacklist Russia.

FATF issued a statement congratulating Albania, the Cayman Islands, Jordan, and Panama for their significant progress in addressing anti-money laundering and counter-terrorist financing deficiencies. However, Bulgaria has been called upon to enhance compliance with FATF's 40 technical standards, increase efforts against money launderers, corrupt officials, and organized crime groups, and introduce legal and regulatory reforms.

Panama and the Cayman Islands, which have been criticized for their lack of transparency, have now moved off the "grey list." This development also hints at the potential removal of the United Arab Emirates from the "grey list" in the future, despite ongoing concerns about Russian illicit funds being channeled through the UAE.

FATF President Raja Kumar confirmed an on-site visit to the UAE before February 2024, indicating continued scrutiny of the country's financial activities.

Asset Recovery as a Key Priority

FATF has emphasized the importance of asset recovery in the fight against money laundering and terrorist financing. The organization believes that countries worldwide are recovering only a small fraction of assets generated by criminal activity, allowing criminals to benefit from their ill-gotten gains and perpetuating further criminal actions.

Delegates have agreed on amendments to the FATF Recommendations, focusing on strengthening the roles and use of asset recovery networks (ARINs) to pursue transnational money laundering cases more effectively.

Indonesia Joins FATF as Russia's Suspension Continues

Indonesia has made significant progress in addressing issues identified during its evaluation, and as a result, the Plenary has granted Indonesia membership in FATF. With Indonesia's accession, there are now 40 members in FATF, including all G20 countries. In contrast, the suspension of Russia remains in place, with FATF urging all jurisdictions to be vigilant against emerging risks associated with the circumvention of measures against Russia.

Protection of Non-Profit Organizations (NPOs) from Terrorist Financing Abuse

FATF has agreed to amendments aimed at protecting non-profit organizations (NPOs) from potential terrorist financing abuse. These changes clarify that FATF Recommendation 8 applies only to a specific subset of NPOs and requires countries to implement risk-based measures to mitigate abuse risks while avoiding undue disruption of legitimate charitable activities.

FATF plans to revise relevant parts of its Methodology for the next round of mutual evaluations to ensure that countries are taking a risk-based approach to prevent misuse of the non-profit sector.

Combatting Terrorism Financing Through Crowdfunding

FATF research shows that terrorist organizations, including ISIS and Al-Qaeda, have exploited crowdfunding platforms and social media for fundraising purposes. The report identifies four ways in which terrorists misuse crowdfunding platforms and emphasizes the need for comprehensive implementation of FATF Standards relevant to virtual assets, NPOs, and money transfer services.

To address the challenges in detecting and preventing terrorism financing through crowdfunding, FATF recommends including crowdfunding in national terrorism financing risk assessments and establishing strong information-sharing mechanisms.

Addressing Illicit Financial Flows from Cyber Fraud

Cyber-enabled fraud, a transnational organized crime, has seen significant growth in recent years. FATF highlights the need for effective measures to combat money laundering and terrorist financing related to cyber-enabled fraud, which often involves rapid international transfers of illicit funds.

Concerns Over Citizenship and Residency by Investment Programs

FATF has completed a joint project with the Organisation for Economic Co-operation and Development (OECD) to explore the money laundering and financial crime risks associated with citizenship and residency by investment (CBI/RBI) programs. While these programs can stimulate economic growth, they also present risks related to money laundering, fraud, and misuse by criminals and corrupt officials. The report proposes measures and best practices for managing these risks, including enhanced due diligence and clear roles and responsibilities for parties involved in CBI/RBI programs.

Strengthening Beneficial Ownership Transparency

FATF has introduced amendments to the Methodology for the next round of mutual evaluations to determine the effective implementation of updated beneficial ownership and transparency requirements. These changes are part of ongoing efforts to prevent the use of shell companies for criminal activity.

In conclusion, FATF is continuing to address various aspects of financial crime and money laundering, including expanding its focus on asset recovery, protecting NPOs from terrorist financing abuse, combatting terrorism financing through crowdfunding, and strengthening beneficial ownership transparency. These developments reflect FATF's ongoing commitment to enhancing the global fight against financial crimes. The next FATF Plenary is scheduled for February 2024.

By fLEXI tEAM