FATF may place Myanmar on its blacklist if it does not enhance its AML/CFT defences

Due to Myanmar's failure to strengthen its anti-money laundering and counter-terrorist financing defences, the global financial watchdog FATF may place the country on a blacklist.

According to knowledgeable sources, the decision will be approved by FATF members during a meeting in Paris in October.

If banned, Myanmar will join Iran and North Korea on the list of countries with "significant strategic deficiencies" in its AML/CFT framework and "high-risk" jurisdictions.

"The FATF’s international cooperation review group, which oversees the process, will likely recommend blacklisting in the October meeting because of the unsatisfactory progress," according to an Asian diplomat told Nikkei Asia.

"The lack of progress shown by the junta means the plenary would find it difficult to justify not moving Myanmar to blacklist… Given the junta’s attitude towards ASEAN recently, if FATF members form a consensus to blacklist Myanmar, I don’t think Singapore, the [current] FATF president, would stand in their way," they continued.

Such a choice would make financial reporting requirements for international financial transactions with banks and financial organizations operating in Myanmar more stringent and might further harm the nation's efforts to attract foreign investment.

The kyat, the country's currency, lost roughly 60% of its value against the dollar when the military took power in February 2021, and foreign direct investment fell to its lowest point since 2011.

Foreign banks and financial institutions would be exposed to more paperwork and rigorous due diligence if Myanmar was blacklisted.

According to a second source, "the chance of blacklisting is high. There is a real possibility. It’s very serious."

"Look at the Central Bank of Myanmar and the guys sent in to run the bank. They are navy people. They can’t even do mock compliance, not even what the SPDC did. They don’t have a clue what’s going on," they continued.

FATF representatives conducted an examination in August after Myanmar submitted a progress report to the group in July.

According to FATF, the AML/CFT regimes in high-risk jurisdictions have "significant deficiencies." Authorities have been cautioned by the organization to do "enhanced due diligence" on the countried on the blacklist.

The FATF released its fourth mutual evaluation report on Myanmar's development last month, detailing the country's "some progress" in resolving the previously noted technical compliance problems.

FATF voiced "significant concern" in its June 2022 plenary session on the nation's lack of advancement despite the fact that all deadlines had passed and "significant" work remained on its action plan.

FATF cautioned that it "strongly urges Myanmar to swiftly complete its action plan by October 2022," otherwise the organization may consider recommending that countries apply enhanced due diligence measures.

By fLEXI tEAM