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The Financial Action Task Force (FATF) last week removed Türkiye and Jamaica from its “grey list” of countries that require special scrutiny because of their AML/CFT deficiencies. Türkiye was included on the global AML/CFT watchdog’s “grey list” in 2021 because of concerns about money laundering and terrorist financing.
FATF removed Türkiye, citing "significant progress" in improving the country’s AML/CFT regime, after its plenary meeting in Singapore last week.
Türkiye strengthened the effectiveness of its AML/CFT regime to meet the commitments in its action plan regarding the strategic deficiencies that the FATF identified in October 2021 including by (1) dedicating more resources at the FIU to supervision of AML/CFT compliance by high-risk sectors and increasing on-site inspections overall; (2) applying dissuasive sanctions for AML/CFT breaches, in particular for unregistered money transfer services and exchange offices and in relation to the requirements of adequate, accurate, and up-to-date beneficial ownership information; (3) enhancing the use of financial intelligence to support ML investigations and increasing proactive disseminations by the FIU; (4) undertaking more complex money laundering investigations and prosecutions; (5) setting out clear responsibilities and measurable performance objectives and metrics for the authorities responsible for recovering criminal assets and pursuing terrorism financing cases and using statistics to update risk assessments and inform policy; (6) conducting more financial investigations in terrorism cases, prioritising TF investigations and prosecutions related to UN-designated groups and ensuring TF investigations are extended to identify financing and support networks; (7) concerning targeted financial sanctions under UNSCRs 1373 and 1267, pursuing outgoing requests and domestic designations related to UN-designated groups, in line with Turkey’s risk profile; (8) implementing a risk-based approach to oversight of non-profit organisations to prevent their abuse for terrorist financing, conducting outreach to a broad range of NPOs in the sector and engaging with their feedback, ensuring that sanctions applied are proportionate to any violations, and taking steps to ensure that supervision does not disrupt or discourage legitimate NPO activity, such as fundraising.
FATF also removed Jamaica from the grey list, noting the island’s more comprehensive understanding of its ML/TF risk; inclusion of all financial institutions and designated non-financial businesses nad professions in the AML/CFT regime and implementing adequate risk based supervision in all sectors; taking appropriate measures to prevent legal persons and arrangements from being misused for criminal purposes, and ensuring that accurate and up to date basic and beneficial ownership information is available on a timely basis; increasing money-laundering investigations and prosecutions, as well as the use of financial intelligence in ML investigations; implementation of targeted financial sanctions for terrorist financing; and taking a risk-based approach for supervision of its non-profit sector to prevent exploitation for terrorist financing purposes.
Although removal from the grey list will give these jurisdictions a measure of confidence, especially for foreign direct investment, the removal does not mean there are no issues. A recent article by Max Meizlish and Sinan Ciddi for the Foundation for Defense of Democracies asserted that Türkiye should remain on the grey list.
At best, FATF’s analysis is incomplete, focusing primarily on reforms related to Ankara’s adoption of cryptocurrency-related legislation. At worst, it is ignoring the facts. Turkey remains a premier jurisdiction for terrorism financing. Perhaps most egregiously, Ankara provides a safe haven and material and financial support to Hamas, the U.S.-designated terrorist group that perpetrated the October 7 atrocities in southern Israel.
And let’s not forget that Türkiye considers HAMAS a political entity and recognizes the terrorist group as a legitimate interlocutor, providing Turkish passports and intelligence to HAMAS leaders, establishing NGOs to support it. And then there’s Turkish companies’ support to Iran, its Islamic Revolutionary Guard Corps (IRGC), and Iranian proxy, the Huthis.
And what about Halkbank? The financial institution owned by the Turkish government, was charged in 2019 with bank fraud, money laundering, and conspiracy over its alleged use of money servicers and front companies in Iran, Türkiye, and the UAE to evade sanctions.
Halkbank asserted that it is shielded from prosecution because, by virtue of being owned by the Turkish government, it should have the same legal protections as the country itself under the Foreign Sovereign Immunities Act, which limits the jurisdiction of American courts over lawsuits against foreign countries. A lawyer for Halkbank in February said the bank was entitled to immunity under common law principles, warranting the dismissal of the US indictment. I note here, that the bank did not deny the charges themselves.
Prosecutors said Halkbank helped Iran secretly transfer $20 billion of restricted funds, converted oil revenue into gold and then cash to benefit Iranian interests, and documented fake food shipments to justify transfers of oil proceeds.
So let’s not pretend that removing Türkiye from the FATF grey list means that the country and its financial system have no more problems. Türkiye has worked hard to remediate the issues flagged by FATF in 2021, but much more work remains to be done.
Jamaica has also been removed from the grey list after being included in 2020. Work remains there as well. Jamaica’s minister of finance and the public service, Dr. Nigel Clarke, said in Singapore last week that before the end of 2025, Jamaica will need to begin regulating virtual assets and virtual asset providers, make the registration of non-profit organisations mandatory, and implement targeted financial sanctions related to proliferation.
Does its removal from the FATF grey list mean Jamaica is now a risk-free jurisdiction? No. It means the country made significant enough progress to no longer require increased monitoring, but caution should still be used. FATF highlighted just a year ago that Jamaica failed to complete its action plan, which fully expired in January 2022.
Jamaica put the pedal to the medal after that assessment, and by February, FATF President T, Raja Kumar said Jamaica was almost there and would possibly be removed in June, which it now has.
The FATF determined that Jamaica has now substantially completed [work] on its action plan and because of the substantial progress that it’s achieved, that this then merits an on-site visit. The on-site team will essentially go down and they would need to satisfy themselves that there is high level political commitment on the part of the Jamaican Government to fully see through the action items that have been identified and the other important task the on-site team will have is to verify the progress that has been achieved and ensure that these are sustainable into the future.
That said, the US Treasury’s National Money Laundering Risk Assessment (NMLRA) earlier this year flagged Jamaica as a continuing risk, especially when it comes to the number of money handlers who help move illicit cash across international borders.
Recent insights by law enforcement have shed further light on the role of “currency handlers,” who are thought to occupy positions with higher levels of responsibility and trust within criminal organizations than couriers and are more likely to be involved in the coordination and scheduling of BCS activities. Law enforcement sources have indicated that they suspect financial supply chain specialists employed by some TCOs send their trusted agents to the currency points of origin to coordinate shipments of bulk cash across the country and then return to the destination to oversee onward movement of those proceeds.
Identifying a currency handler can provide a window to the inner workings of the criminal networks they serve. According to discussions with U.S. law enforcement, over half of the identified currency handlers were U.S. citizens. Mexican citizens represented the largest block (approximately one third) of foreign currency handlers, followed by citizens from the Dominican Republic and Jamaica.
Progress is great. Caution is prudent.
The FATF last week also included Monaco and Venezuela on the grey list, citing Monaco’s failure to make sufficient progress in curbing illegal financial flows despite some progress in issues previously identified. A series of policies after the Council of Europe's AML body targeted Monaco over claims made against several figures close to its Prince Albert II that led to the ouster in 2023 of crown assets chief administrator Claude Palmero, were insufficient to prevent the municipality from being added to the grey list.
The Organized Crime and Corruption Reporting Project (OCCRP) last year highlighted that sanctioned Russian oligarch Boris Rotenberg has spent considerable time in Monaco, developing and hiding his ownership of a vast real estate portfolio.
Monaco did scramble late in the game to keep itself off the grey list, which would endanger the municipality’s reputation as an international financial hub. But the Council of Europe’s anti-money laundering body (MONEYVAL) flagged in a December 2022 report that despite some progress, “fundamental improvements are needed to enhance effectiveness on supervision, ML investigations and prosecutions and confiscation of proceeds of crime.”
And do we really need to even detail the issues in Venezuela? I’m frankly surprised that FATF only now saw it fit to include it on the grey list. I’m also shocked the country hasn’t been blacklisted, along with Iran, North Korea, and Myanmar.
In June 2024, Venezuela made a high-level political commitment to work with the FATF and CFATF to strengthen the effectiveness of its AML/CFT regime. Since the adoption of its MER in November 2022, Venezuela has made progress on some of the MER’s recommended actions including by updating its national risk assessment. Venezuela will work to implement its FATF action plan by: (1) strengthening its understanding of ML/TF risks, including in relation to TF and legal persons and arrangements; (2) ensuring the full range of financial institutions and DNFBPs are subject to AML/CFT measures and risk-based supervision; (3) ensuring adequate, accurate and up-to-date beneficial ownership information is accessible in a timely manner; (4) enhancing the resources of the FIU and improving competent authorities’ use of financial intelligence; (5) enhancing the investigation and prosecution of ML and TF; (6) ensuring measures to prevent the abuse of NPOs for TF are targeted, proportionate, and risk-based and do not disrupt or discourage legitimate activities within the NPO sector; and (7) implementing TF-and PF-related targeted financial sanctions without delay.
The latest Mutual Evaluation Report issued in March 2023 issued several key findings that make Venezuela a significant AML/CFT risk, which among other things included:
Limited legislative and regulatory instruments and structures to combat ML/TF effectively.
Insufficiently detailed risk assessments. In the case of the most recent assessment, the country’s analysis of threats and vulnerabilities is not deep enough and the focuses mainly on mitigating measures.
There’s no real explanation about the AML/CFT risks presented by DNFBPs, which are merely regarded as high-risk based on insufficient regulation and supervision.
The National Financial Intelligence Unit (UNIF) does not have access to other reports other than suspicious activity reports (SARs), which limits the scope of the information to which the UNIF has access.
Reporting entities prepare SARs manually and submit them in paper at the UNIF’s service desk, which could affect the quality of SARs since the time allocated for their preparation may be reduced by the time needed to disseminate them within the vast Venezuelan territory.
The current system of cooperation between law enforcement and investigative bodies is not agile or efficient, and there is no direct contact between different authorities. The Attorney General’s Office that mediates the communications of all stakeholders.
The number of investigations on predicate offences exceeds the number of ML investigations, which reveals that ML is not an investigation priority.
Confiscation and forfeiture of the instrumentalities and the proceeds of crime are not considered as policy objectives. The country has no specific national strategy or plan focused on confiscation and forfeiture.
There are no data on international cooperation regarding the repatriation and restitution of the proceeds of ML and predicate offences committed abroad, or of the proceeds sent to other countries.
The assessment team considers that the lack of a legal framework implementing FATF Recommendation 7 that requires countries to implement targeted financial sanctions to comply with the UN Security Council Resolutions (UNSCRs) relating to the prevention, suppression and disruption of proliferation of weapons of mass destructions (WMD) prevents reporting entities from being aware of or understanding the obligations arising from these UNSCRs.
Venezuelan supervisory authorities do not have records of the deficiencies identified.
Financial institutions (FIs) and DNFBPs not subject to regulation and control and do not see themselves as AML/CFT reporting entities.
Except for the communications within the Egmont Group, the Ministry of Foreign Affairs plays a coordinating role in relation to the exchange of information at the international level. Thus, the other authorities do not directly communicate with their foreign counterparts, but in case they require any information, they request it to the Ministry of Foreign Affairs, which subsequently forwards the request to the foreign counterpart. No evidence was provided either to confirm that these communications actually occur. Nor was there evidence of international cooperation between the other competent authorities and other countries.
These deficiencies definitely make Venezuela an illicit finance risk, but if you don’t want to wade through the lengthy list of issues, the bottom line on Venezuela is that it’s rife with political unrest, financial collapse, and corruption that allowed transnational criminal organizations (TCOs) to operate unchecked, engaging in activities such as money laundering, human trafficking, and the narcotics trade, according to the US Government Accountability Office last year.
The assessment was released before the US Treasury’s Office of Foreign Assets Control last year issued six general licenses authorizing categories of transactions that were previously prohibited under the U.S. sanctions program against Venezuela.
The partial sanctions relief was the U.S. government’s response to an agreement between Venezuela’s Unitary Platform and representatives of President Nicolás Maduro that created a roadmap for democratic elections in the country, but guess what! The Maduro regime reneged on its promises, and Venezuela’s sanctions relief has been reversed.
As I wrote with K2 Integrity’s Amir Fadavi last year, US firms and financial institutions still needed to be cautious when transacting with Venezuela. The licenses that granted partial sanctions relief were specific and conditional on the Maduro regime living up to the promises it made to hold free and fair elections. Major sanctions programs remained. The US government said in October that the sanctions relief would be revoked should the Maduro regime fail to abide by the terms of the electoral roadmap, and we recommended that those who intended to use these licenses had to ensure proper controls in place in case snapback occurs.
A lot of risks remained for those who intended to use the general licenses to transact with Venezuelan entities.
Those who engage in newly authorized transactions must still consider the risk of dealing with other sanctioned persons. Because hundreds of individuals and entities remain on OFAC’s Specially Designated Nationals list under the Venezuela sanctions program, U.S. firms and financial institutions must execute careful screening to ensure that newly authorized transactions do not involve still-sanctioned entities and individuals.
High-level corruption is a major problem in Venezuela, with the country ranking 177th out of 180 countries on Transparency International’s most recent Corruption Perceptions Index. And as I mentioned above, the corruption has created a favorable environment for criminal organizations to operate.
In addition, the Maduro regime has allowed drug trafficking organizations to operate in the country, making Venezuela a preferred trafficking route for moving drugs to the global market.
Maduro has also sidled closer to risky jurisdictions such as Russia, Iran, and Cuba. Given Russia’s, Iran’s, and Cuba’s increased presence and economic engagement with Venezuela, those engaging in Venezuela-related transactions must closely examine potential counterparties in Venezuela to ensure that their transactions are not linked to other sanctioned countries.
Being included on the FATF grey list means that even through the country’s AML/CFT regime is deficient, the jurisdiction has made a commitment to resolve those strategic deficiencies within agreed timeframes and is subject to increased monitoring. Results can range from a decrease in foreign direct investment, to reputational damage, and economic decline.
But as I mentioned, being removed from the grey list, or not being included on the list in the first place does not mean that a country is a safe place to park your assets or in which to transact. Here’s looking at you, Russia!