At the end of a plenary meeting held in Paris this week, the Financial Action Task Force (FATF) has just re-evaluated the solidity of the continent's financial systems. The anti-money laundering organization has thus added four new countries, including three African countries, to its list of jurisdictions under enhanced surveillance, also called the “gray list”. This decision by the international watchdog for the fight against money laundering and the financing of terrorism (AML/CFT) has a chain of consequences for the government and the local institutions concerned

The process put in place by the FATF to list countries with weak AML/CFT regimes on public lists is a global reference and can therefore damage the country's reputation on the world stage. It is a surveillance measure applied to countries that have shortcomings in the fight against money laundering and terrorist financing. Thus, for a country, being on this grey list signals deficiencies in AML/CFT compliance, which can damage its reputation. Partner states and international organizations are becoming more cautious, applying reinforced controls or adjusting their perception of risks in relation to the country, which may affect regional partners as well

Grey-listing poses a risk for foreign direct investment (FDI) as it often deters foreign investors who want to avoid jurisdictions that are perceived as risky. It also leads to an increase in the cost of debt. Rating agencies can reassess a country's credit rating, which increases the cost of accessing international loans and can make it difficult to finance projects. International transactions are more controlled, slowing down operations and increasing costs for businesses

for their part, international financial entities are required to strengthen their vigilance and compliance checks when transacting with a listed country. Countries on the FATF grey list now have a greater obligation to be transparent. They often have to draw up an action plan and provide regular reports, which are subject to periodic evaluations by FATF. In addition, governments are required to make regulatory improvements; among other things, stronger laws, strengthened supervisory structures, and better training of compliance teams in order to get out of the gray list. Finally, to meet the requirements of the FATF, the countries concerned must collaborate more with international partners, which may include agreements for the exchange of financial data and

Banking institutions and insurance companies hit hard

Banks and insurers that operate in jurisdictions with weak AML/CFT measures face an increased reputation for risk, affecting their ability to attract and maintain international customers. Partner institutions may restrict relationships with entities in these jurisdictions. Institutions are required to apply strengthened AML/CFT controls. Also, banks and insurance companies are often subject to more regular audits and are forced to provide detailed reports to national and international regulators. These banking institutions may lose their international banking relationships, limiting their ability to offer cross-border services. They are also subject to increased transaction verification, leading to delays and additional costs. This is hurting local businesses that rely on international banking services. Also, multinationals and international customers are often reluctant to deal with institutions located in countries on the FATF gray list. As a result, local businesses would find it difficult to obtain international financing.

By Editors Orishas Finance