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Understanding the Financial Action Task Force's (FATF) Call for Action on High-Risk Jurisdictions


As a global financial watchdog, the Financial Action Task Force (FATF) is responsible for identifying and coordinating international efforts against money laundering, terrorist financing, and proliferation financing (ML/TF/PF) activities that threaten the international financial system. On 23 June 2023, the FATF issued a statement regarding high risk jurisdictions subject to a call for action calling on its members and all jurisdictions to take specific measures and actions aimed at Iran, the Democratic People's Republic of Korea, and Myanmar. These countries have been identified as high-risk jurisdictions with strategic deficiencies in their regimes for countering ML/TF/PF activities.


The FATF's call for action on high-risk jurisdictions is a longstanding one of its primary functions. It maintains a list of countries called "high-risk jurisdictions" that have significant strategic deficiencies in their regimes for countering ML/TF/PF activities. Countries on this list are called upon to apply enhanced due diligence measures and, in the most serious cases, counter-measures to safeguard the international financial system.


One of the most significant measures that all jurisdictions are called upon to apply is enhanced due diligence. Enhancing due diligence requires financial institutions to identify clients and transactions involving high-risk jurisdictions, apply a risk-based approach to their dealings with these clients or transactions, and take enhanced measures to mitigate the ML/TF/PF risks.


In the most serious cases, jurisdictions are called upon to apply counter-measures to protect the international financial system from the ML/TF/PF risks emanating from the high-risk jurisdiction. Counter-measures can take various forms, such as limiting or prohibiting financial transactions with the high-risk jurisdiction, increasing oversight and regulation of the high-risk jurisdiction's financial institutions, and requiring additional reporting or monitoring requirements.


It is important to note that the FATF's call for action on high-risk jurisdictions is not limited to the three jurisdictions mentioned in the FATF's June 23 statement. The FATF regularly updates its list of high-risk jurisdictions subject to a call for action. Additionally, the organization also monitors other jurisdictions that have been identified to have strategic deficiencies in their AML/CFT regimes, and that are working with the FATF to address these deficiencies.


In conclusion, the FATF's call for action on high-risk jurisdictions emphasizes the importance of international cooperation in addressing money laundering, terrorist financing, and proliferation financing activities. By applying enhanced due diligence measures and counter-measures, financial institutions and jurisdictions can help mitigate the ML/TF/PF risks emanating from high-risk jurisdictions and protect the global financial system.


In conclusion, the FATF's call for action on high-risk jurisdictions underscores the importance of international cooperation in tackling money laundering, terrorist financing, and proliferation financing. Through the implementation of enhanced due diligence measures and countermeasures, financial institutions and jurisdictions can help reduce the risks associated with high-risk jurisdictions and safeguard the global financial system.

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