Cayman Islands near FATF grey list exit, Gibraltar to action 'ASAP', UAE to up sanctions

The Cayman Islands has substantially completed its grey list action plan and will proceed to an on-site assessment prior to FATF's October plenary, while other jurisdictions still have significant 'to do' lists including Gibraltar which was urged to tackle deadline expired deficiencies as soon as possible.   

And despite speculation that the UAE might be close to exiting the grey list, the FATF instead asked it for a "substantial increase" in various sanctions and investigations across the AML remit. 

International Investment reported last Friday 23 June that Cameroon, Croatia and Vietnam had joined the FATF grey list while Russia's membership remains suspended, as the third Plenary of the FATF under the Presidency of T. Raja Kumar of Singapore concluded in an update statement. 

Drilling down into its latest position on the Cayman Islands, FATF made the "initial determination" that it had "substantially completed its action plan and warrants an on-site assessment to verify that the implementation of the AML/CFT reforms has begun and is being sustained, and that the necessary political commitment remains in place to sustain implementation in the future".

The statement added that the Cayman Islands had made the following key reforms, including: (1) applying sanctions that are effective, proportionate and dissuasive, and taking administrative penalties and enforcement actions against obliged entities to ensure that breaches are remediated effectively and in a timely manner; (2) imposing adequate and effective sanctions in cases where relevant parties (including legal persons) do not file accurate, adequate and up to date beneficial ownership information; and (3) demonstrating that they are prosecuting all types of money laundering in line with the jurisdiction's risk profile and that such prosecutions are resulting in the application of dissuasive, effective, and proportionate sanctions.

On new grey list entrant Croatia, the FATF said since the adoption of its MER in December 2021, the EU member country had made progress on its MER's recommended actions to improve its system by licensing and monitoring the registration of VASPs, enhancing and implementing more effective sanctions in supervisory activities and enhancing implementation of preventive measures for high-risk sectors.

A seven point action plan will see Croatia: (1) Completing the national risk assessment, including assessing the ML/TF risk associated with the misuse of legal persons and legal arrangements and the use of cash in the real estate sector; (2) Increasing FIU human resources and improving analytical capabilities; (3) Continuing to improve LEAs detection, investigation and prosecution of different types of ML, including ML involving a foreign predicate offences and the misuse of legal persons; (4) Demonstrating a sustained increase in the application of provisional measures in securing direct/indirect proceeds, as well as foreign proceeds subject to confiscation; (5) Demonstrating the ability to systematically detect and where relevant investigate TF in line with its risk profile; (6) Establishing a national framework for the implementation of UN TFS measures and providing guidance and conducting outreach and training to the reporting entities; and (7) Identifying the subset of NPOs most vulnerable to TF abuse and providing targeted outreach to NPOs and to the donor community on potential vulnerabilities of NPOs to TF abuse.

Turning to Gibraltar, the FATF noted that it "continued progress across its action plan; however, all deadlines have now expired".

Although Gibraltar had made a high-level political commitment to work with the FATF and MONEYVAL, it should take "more enforcement actions, imposing financial penalties, and publishing the results of cases, where appropriate. Gibraltar should continue to work on implementing its action plan to address its strategic deficiencies, including by showing that it is able to pursue more final confiscation judgments commensurate with the risk and context of Gibraltar".

The FATF encouraged Gibraltar to continue to implement its action plan to address the above-mentioned strategic deficiencies as soon as possible".

South Africa's more recent arrival on the FATF grey list in February 2023 had seen it "taking steps towards improving its AML/CFT regime during its first cycle of reporting, including by improving its criminalisation of terrorist financing".

But it "should continue to work on implementing" to address strategic deficiencies, including by: (1) demonstrating a sustained increase in outbound MLA requests that help facilitate ML/TF investigations and confiscations of different types of assets in line with its risk profile; (2) improving risk-based supervision of DNFBPs and demonstrating that all AML/CFT supervisors apply effective, proportionate, and effective sanctions for noncompliance; (3) ensuring that competent authorities have timely access to accurate and up-to-date BO information on legal persons and arrangements and applying sanctions for breaches of violation by legal persons to BO obligations; (4) demonstrating a sustained increase in law enforcement agencies' requests for financial intelligence from the FIC for its ML/TF investigations; (5) demonstrate a sustained increase in investigations and prosecutions of serious and complex money laundering and the full range of TF activities in line with its risk profile; (6) enhancing its identification, seizure and confiscation of proceeds and instrumentalities of a wider range of predicate crimes, in line with its risk profile; (7) updating its TF Risk Assessment to inform the implementation of a comprehensive national counter financing of terrorism strategy; and (8) ensuring the effective implementation of targeted financial sanctions and demonstrating an effective mechanism to identify individuals and entities that meet the criteria for domestic designation.

As for the UAE, the FATF gave it a three point for improvement despite pointing to "significant progress, including by enhancing and maintaining a shared understanding of the ML/TF risks between the different DNFBP sectors and institutions, and ensuring a more granular understanding of the risk of abuse of legal persons and legal arrangements for ML/TF".

The UAE's FATF action plan should be delivered by: (1) demonstrating a sustained increase in the application of effective, proportionate and dissuasive sanctions for FI and DNFBP noncompliance with AML/CFT requirements; showing that DNFBP sectors are implementing risk-based CDD; and showing an increase in the number and quality of STRs filed by FIs and DNFBPs; (2) demonstrating a sustained increase in the issuance of dissuasive, effective and proportionate sanctions where necessary for breaches of beneficial ownership obligations and (3) demonstrating a sustained increase in effective investigations and prosecutions of different types of ML cases consistent with UAE's risk profile.

For the full list of grey list country updates, click here.  

For the black list country updates, click here.