The Financial Action Task Force (FATF), an inter-governmental body responsible for setting international standards to combat money laundering, terrorist financing, and proliferation financing, has recently made headlines by removing several countries from its ‘grey list’ while adding another.
The FATF’s Grey List
The FATF maintains a ‘grey list,’ which consists of jurisdictions that do not meet the organization’s anti-money laundering (AML), counter-terrorism financing (CFT), and proliferation financing standards. Countries placed on this list are subject to increased monitoring until identified deficiencies in their regulatory frameworks are resolved.
Removal of Cayman Islands and Others
In a review published on October 27, 2023, FATF announced the removal of several countries from its ‘grey list.’ These countries include the Cayman Islands, Panama, Jordan, and Albania. This development is a testament to the significant progress these nations have made in enhancing their AML/CFT systems, ultimately addressing the strategic deficiencies identified by FATF.
Bulgaria Added to the Grey List
While several countries celebrated their removal from the ‘grey list,’ FATF added Bulgaria to the list. This decision reflects the need for Bulgaria to strengthen its AML, CFT, and proliferation financing systems, aligning them with international standards.
Focus on Cayman Islands
The Cayman Islands, a British Overseas Territory, found itself on the FATF’s ‘grey list’ in 2021. This status was a result of strategic deficiencies in their AML/CFT regime, which raised concerns among the international community. The inclusion of the Cayman Islands on the list was notable due to its prominence in global financial markets.
Reforms in the Cayman Islands
In its October review, FATF highlighted the Cayman Islands’ commendable efforts in strengthening the effectiveness of its AML/CFT regime to address the identified deficiencies. This commitment and progress played a pivotal role in the jurisdiction’s removal from the ‘grey list.’
Impact on Investments
The Cayman Islands is a preferred domicile for many foreign portfolio investors (FPIs), with around 385 FPIs registered in India and one based in Panama. While neither of these nations ranks among the top 10 geographies for FPIs investing in India, the Cayman Islands is particularly significant for FPI and foreign direct investment (FDI) flows into India.
Potential for Increased Investments
Experts suggest that the removal of the Cayman Islands from the FATF’s ‘grey list’ could lead to higher investment flows from this British Overseas Territory. The removal is expected to alleviate the negative perception that had led some large investors to restrict their investments in the Cayman Islands over the past two years.