Basics-to-know about the Non-Cooperative Countries and Territories (NCCT) Initiative of the Financial Action Task Force (FATF)

Hi, Everyone:

 

The Non-Cooperative Countries and Territories (NCCT) Initiative (of FATF blacklist) lists countries which the Financial Action Task Force (FATF) judges to be non-cooperative in the global fight against money laundering and financing of terrorism (ML/FT), with the aim of reducing the vulnerability of the financial system by ensuring that all financial centres adopt and implement measures for the prevention, detection and punishment of money laundering according to internationally recognised standards. A total of 47 countries or territories were examined in two rounds of reviews (2000 and 2001), resulting in a list of 23 NCCTs (15 in 2000, and 8 in 2001). As of October 2006, there are no NCCTs in the context of this initiative. (FATF, n.d.) 

 

Nevertheless, the NCCT initiative has served to detect "High-risk jurisdictions subject to a Call for Action", countries and territories having "significant strategic deficiencies in their regimes to counter money laundering, terrorist financing, and financing of proliferation", urging the 39 members of FATF (representing most financial centres worldwide) and one observer nation (Indonesia) to apply enhanced due diligence, or even counter-measures to protect the international financial system against ML/FT potential risks emanating from the country.

 

As of 3 August 2020, only two countries were on the blacklist: North Korea and Iran. And also 18 nations in the greylist: Albania, Bahamas, Barbados, Botswana, Cambodia, Ghana, Iceland, Jamaica, Mauritius, Mongolia, Myanmar, Nicaragua, Panama, Pakistan, Syria, Uganda, Yemen and Zimbabwe (Wikipedia, 2020).

 

In my opinion, the effectiveness of the NCCT initiative as a "shaming technique" (or an example of "experimentalist governance" as stated Nance, 2018) was outstanding, judging the quick reaction of many countries to implement AM/FT measures in line with the FATF's standards.

 

The greylist is a warning given to the country that it might come into the blacklist, facing problems like difficulty in getting loans and even receiving economic sanctions from international institutions and FATF member states, overall reduction in its international trade, and international boycott (for instance, Pakistan, who was graylisted in 2008, again from 2012 to 2015, and in June 2018, with a final deadline set on February 2020 to comply with all the FATF standards or to be blacklisted; Singh, 2020; Sharma, 2020).

 

There is some criticism about the NCCT initiative as well. Some observers have criticized the use of the term "non-cooperative" in reference to countries on the blacklist, pointing out that some of them, rather than acting in defiance, simply not have the regulatory infrastructure or resources to enact the FATF standards (Comply Advantage, n.d.). And, on an overall basis, there are voices raised against the legitimacy (Hulsse, 2008) and the omnipresent de facto force of some international organizations in economics and politics (Kerwer & Hulsse, 2011; Nance, 2017), being evident in the specific case of Pakistan, as shows recent events (Sharma, 2020).

 

Apart from that, it's undeniable its importance in terms of obliging many countries to adopt international compliance standards, with the purpose of preventing and combating AM/FT all around the world.

Until a next time, 

Camilo García Sarmiento

 

Sources:

 

(n.d.) About the Non-Cooperative Countries and Territories (NCCT) Initiative. FATF. Retrieved from: https://www.fatf-gafi.org/publications/high-riskandnon-cooperativejurisdictions/more/aboutthenon-cooperativecountriesandterritoriesncctinitiative.html?hf=10&b=0&s=desc(fatf_releasedate)

 

(n.d.). FATF Blacklists and Greylists: What You Need To Know. Comply Advantage. Retrieved from: https://complyadvantage.com/knowledgebase/fatf-blacklists-greylists/

 

(2020, August 10) FATF blacklist. Wikipedia. Retrieved from: https://en.wikipedia.org/wiki/FATF_blacklist

 

Hulsse, R. (2008) Even clubs can’t do without legitimacy: Why the anti‐money laundering blacklist was suspended. Regulation & Governance / Vol. 2, Issue 4; 459 - 479. Retrieved from: https://onlinelibrary.wiley.com/doi/full/10.1111/j.1748-5991.2008.00046.x

 

Kerwer, D., & Hulsse, R. (2011) How international organizations rule the world: the case of the financial action task force on money laundering. Retrieved from: https://www.semanticscholar.org/paper/How-international-organizations-rule-the-world-%3A-of-Kerwer-H%C3%BClsse/76ad3cf7d2e7f4c5d84ede6ae1bc49c40dbc471a

 

Nance, M. (2017, December 18). Re-thinking FATF: an experimentalist interpretation
of the Financial Action Task Force. Crime Law Soc Change (2018) 69:131–152. Retrieved from: https://link.springer.com/content/pdf/10.1007/s10611-017-9748-5.pdf

 

Singh, H. (2020, February 17). What is the Grey List and Black List of the Financial Action Task Force? JagranJosh. Retrieved from: https://www.jagranjosh.com/general-knowledge/grey-list-and-black-list-of-the-financial-action-task-force-1551079247-1

 

Sharma, P. (2020, February 20). Pakistan Unlikely To Be Put On FATF 'Blacklist' Despite Failing To Implement Agreed Action Plan. Outlook India. Retrieved from: https://www.outlookindia.com/website/story/news-analysis-despite-failure-on-implementing-agreed-action-plan-pakistan-unlikely-to-be-put-on-fatf-blacklist/347619