Gibraltar added to the FATF's 'grey list', Malta is removed and Pakistan remains on it.

The British overseas territory of Gibraltar was added to the FATF's "grey list" today.

The decision could have serious ramifications for the British overseas territory's financial services industry. The impact of being placed on the watchlist on GDP is estimated to be 7.6%.


The news came at the same time as the FATF announced that Malta had been removed from the grey list, one year after it had been placed there. Despite Indian media speculation, Pakistan remains on the watchlist.


The designation comes after Gibraltar made a high-level political commitment earlier this month to work with the FATF and MONEYVAL to improve the effectiveness of its anti-money laundering and counter-terrorist financing regime.


As a result of the FATF's evaluation in 2019, Gibraltar has been struggling.

"Since the adoption of its MER in December 2019, Gibraltar has made progress on a significant number of its MER’s recommended actions," the FATF said.


However, this was insufficient to keep the British outcropping on the Spanish mainland off the grey list.


Gibraltar must work on implementing the FATF's action plan by:


- ensuring that supervisory authorities for non-bank financial institutions and DNFBPs use a variety of effective, proportionate, and deterrent sanctions for AML/CFT violations; and 

- ensuring that supervisory authorities for non-bank financial institutions and DNFBPs use a variety of effective, proportionate, and deterrent sanctions for AML/CFT violations; and 


Senior AFC leaders believe that "the Rock," as Gibraltar is known, does not have much more to do to get off the grey list, based on this assessment. However, sources claim that it could take longer than the year Malta took to recover.


Outgoing FATF President Dr. Marcus Pleyer warned that the territory needs to "take a number of steps including focusing on gatekeepers to the financial system in particular gambling operators and lawyers," during a press conference following the plenary.


"At the moment, supervisors are not issuing proportionate fines or penalties for money laundering or terrorist financing breaches, supervisors need to start doing that including using financial penalties where appropriate," he said.


"This is important because the gambling sector is large in Gibraltar and is aimed at foreign clientele," he added.


"Supervisors need to deal with these risks, lawyers conducting transactions such as real estate that can be a money laundering risks. Authorities need to also actively and successfully pursue the final confiscation of funds that are seized to permanently deprive criminals of their illicit funds," according to Dr. Pleyer.


Gibraltar, on the other hand, had made some progress in terms of completing a new national risk assessment, addressing technical deficiencies in relation to BO-related record keeping, introducing transparency requirements for nominee shareholders and directors, strengthening the financial intelligence unit, and refining its ML investigation policy in light of risks, according to the task force.


Pakistan will remain on the FATF's grey list until the global financial watchdog can conduct a technical site visit after the country has completed its two action plans.


"After a lot of work by the Pakistani authorities, I am glad to say that they have now largely addressed all 34 action items from their combined two action plans," Dr. Pleyer said, "  ."


FATF has now recommended an on-site visit to "check that Pakistan’s reforms are in-place and can be sustained into the future," according to him.


Dr. Pleyer explained, "Pakistan is not being removed from the grey list today, the country will be removed from the list if it successfully passes the on-site visit."


Dr. Pleyer praised Pakistan's efforts, saying that "tthe reforms implemented by Pakistan” were “good for the stability and security of the country and the region”, and will “ensure that Pakistan’s authorities can more effectively tackle money laundering and financing of terrorist groups."


A decision by the FATF to put the EU's smallest member state on the grey list in June 2021 sent shockwaves through the bloc.


FATF has announced that Malta will be removed from the grey list as a result of its efforts.


The FATF identified "serious deficiencies" in June 2021, according to Dr. Pleyer, and the Maltese government agreed to an action plan, which it has since completed.


"As a result, it is now better placed to tackle money laundering and terrorist financing," the outgoing President said of Malta's efforts.


He stated that the FATF team visited the country in April and congratulated the country on being removed from the list.


He cautioned, however, that the decision "doesn’t mean there isn’t more work to do," and that the FATF urged Malta to "strongly focus on continuing to strengthen its systems and measures to tackle money laundering and terrorist financing."


The FATF Plenary is the FATF's decision-making body. A four-day hybrid meeting in Berlin brought together delegates from 206 Global Network members and observer organizations, including the International Monetary Fund, the United Nations, and the Egmont Group of Financial Intelligence Units.


It was the last Plenary meeting held during Marcus Pleyer's German presidency.

By fLEXI tEAM