FATF Grey List 2025: Top Risks and What Triggers Country Listings
The FATF's tri-annual 'Grey List' publication wields extraordinary power, listing the countries most at risk to money laundering and terrorist financing in the global financial system.
The impact of FATF greylisting on a country's economy is huge. It can trigger massive capital flight. Take Pakistan, which was grey-listed in 2008, and lost an estimated $38 billion by 2021. It can also force governments to abandon entire policy programs, as Albania discovered when its Voluntary Tax Compliance program was rejected for not complying with FATF principles.
We analysed ten years of FATF data to identify the critical factors that determine grey-listing. The findings reveal clear patterns that financial crime professionals need to understand, and will help them predict future listings and delistings.
Why Countries Develop AML Deficiencies
Low to middle-income countries (LMICs) comprise 80.5% of grey-listed nations between 2020 and 2025. Curiously, middle-income countries are 12% more likely to be grey-listed than low-income nations, having greater exposure to global financial flows than low-income nations, while lacking the resources of high-income countries to combat corruption and crime.
Budget Constraints
Resource scarcity remains the primary driver. The FATF consistently demands "adequately resourced" Financial Intelligence Units and Law Enforcement Agencies across grey-listed countries from Ghana to Monaco.
South Africa's 2024 listing exemplifies this challenge. Chad Thomas, CEO of IRS Investigations, notes that agencies like Hawks operate at half capacity due to budget constraints. Money laundering cases sit unprosecuted for five years while authorities prioritise South Africa’s rising levels of violent crime over financial crime.
Interestingly, in some instances, financial crime prosecutions increase when violent crime declines. Albania's October 2023 removal coincided with declining violent crime rates, perhaps because authorities could reallocate resources to sophisticated ML prosecutions, a key delisting requirement.
Inter-agency Coordination Failures
Inter-agency coordination failures appear repeatedly in FATF assessments across Albania, Cambodia, Morocco, Nigeria, and Vietnam. The persistent demand for "sophisticated" ML prosecutions reveals that financial crime requires specialised expertise that's difficult to develop quickly.
Institutional Corruption
By correlating data from Transparency International with the FATF grey list countries, we see that countries with higher public servant corruption rates are five times more likely to appear on the Grey List. Corrupt officials often fail to prosecute financial crime due to bribery, creating systemic enforcement gaps.
South Africa experienced increased corruption, leading to its 2024 listing. According to the Afrobarometer, 82% of citizens believe corruption has worsened in 2023. Jacob Zuma's presidency (ending 2022) entrenched political patronage networks, while President Ramaphosa's anti-corruption efforts have stalled due to ruling party infighting.
External Factors
Geopolitical realities can indefinitely delay delisting despite technical compliance. Syria and Yemen have remained grey-listed since February 2020, having "substantially addressed their action plan at a technical level" by June 2024, but the FATF cannot conduct on-site visits due to security situations.
Bulgaria's October 2023 listing followed the Russian invasion of Ukraine and the subsequent surge in Russian-registered businesses that authorities failed to control.
The 5 Main Grey-Listing Factors
1. Failure to prosecute money laundering cases
The correlation between risk levels and prosecution rates has become the FATF's primary measurement tool, with "Prosecutions" appearing twice in February 2018 reports but thirty-one times by June 2025.
Case Study: The Philippines was removed in February 2025 following high-profile prosecutions, including a former mayor's money laundering case. Declining corruption rates since 2014 have directly correlated with improved AML implementation.
The lesson: FATF now prioritises real-world enforcement over technical compliance. Actions matter more than policies.
2. Weak beneficial ownership transparency
"Beneficial ownership" mentions increased from once in October 2016 to seventeen times by June 2025. However, implementation must be robust. The British Virgin Islands were grey-listed in June 2025 despite having a register, with its beneficial ownership information being limited to those in a criminal investigation.
Case Study: Albania's October 2023 removal was largely due to ensuring "accurate and up-to-date basic and beneficial ownership information is available on a timely basis." Their public register coincided with increased official dismissals and dramatic improvements in prosecution rates. For instance, SPAK seized €65.5 million in 2024, with investigations more than doubling from 20 in 2022 to 47 in 2024.
The challenge: Financial crime professionals must assess practical transparency versus the legal framework. The BVI technically has a beneficial ownership register; practically, it's nearly inaccessible.
3. Implementing Terrorist Financing Frameworks and Targeted Financial Sanctions
Implementing UN-mandated targeted financial sanctions "without delay" represents perhaps the FATF's most stringent requirement. This particularly affects war-torn nations and those experiencing regional spillovers: Nigeria faces Boko Haram, Burkina Faso confronts Sahel jihadist activity, while Haiti battles violent gangs designated as terrorist organisations.
High-income tax havens also face exposure through sanctioned individuals. Monaco remains grey-listed despite freezing sanctioned assets, largely due to its traditional role as a tax haven for Russian oligarchs.
Case Study: Bulgaria was grey-listed in October 2023 primarily for failing to seize assets of sanctioned Russian individuals and PEPs, unsurprising given thousands of new Russian company registrations.
4. Non-Profit Organisation Oversight Failures
The importance of NPO oversight has increased fourfold since October 2020. In terms of FATF guidance for non-profit organisations, the FATF requires a delicate balance, preventing terrorist financing abuse while avoiding overregulation that disrupts legitimate activities.
Uganda demonstrates both extremes. Initially grey-listed in February 2014 due to 'Lord's Army' terrorist threats, it implemented comprehensive reforms but went too far, subjecting all NPOs to identical AML requirements regardless of risk. After the FATF consultation, Uganda refined its approach and was removed in February 2025.
South Africa exemplifies insufficient oversight: identified as a conduit for Islamic State and al-Shabaab financing, yet lacking comprehensive NPO registration or risk assessment systems.
5. Lack of International Cooperation and Mutual Legal Assistance
The FATF increasingly emphasises countries' capacity to fulfil Mutual Legal Assistance requests efficiently. Common failures include bureaucratic, paper-based systems requiring multiple approvals and insufficient resources for timely responses, as well as a lack of a unified framework for countries to follow.
Case Study: Monaco's domestic legislation creates obstacles. Documents must remain in Monaco for two months, hampering cooperation. Between 2020 and 2022, only six money laundering investigations resulted from MLAs, inconsistent with Monaco's risk profile. Additionally, income tax evasion isn't criminal in Monaco, limiting cooperation scope.
Successful reforms matter: The Bahamas' removal partly stemmed from "developing a comprehensive electronic case management system for international cooperation."
Evolving Trends
FATF recommendations on virtual assets
The FATF increasingly judges Virtual Assets (VAs) as ‘high risk’, and mentions “virtual assets” with far greater frequency than it did five years ago.
For a few reasons. The risk level of crypto assets has increased in line with their wider adoption and integration within the financial system. Take the UK. 12% of the British population owns crypto assets in 2025, up from 4.4% in 2021, when their risk level was judged ‘medium’ by the UK’s National Risk Assessment.
The FTA highlights that the use of stablecoins by criminals from North Korea, terrorist financiers, and drug traffickers has increased markedly since 2024. This risk is exacerbated by mass adoption, a critical factor we highlighted in our report on the top emerging AML threats facing the UK.
Terrorists are increasingly using obfuscation techniques such as shared wallets, mixers, and chain-hopping, as well as shifting to more privacy-focused VAs.
There are enormous challenges for AML professionals, most especially in asset recovery. North Korean hackers carried out the biggest theft in virtual asset history, stealing $1.46 billion in VAs, with barely 3.8% of the assets recovered. The most essential means of working on VA recovery, as it is with traditional ML cases, is international cooperation.
The Travel Rule
As of June 2025, it said that FATF member nations have made progress in implementing regulations surrounding crypto assets and virtual asset service providers (VASPs). According to the FATF’s update, 99 jurisdictions are implementing or have already implemented the ‘Travel Rule’, which ensures transparency in information about cross-border transfers of crypto assets.
However, as the FATF notes, “regulatory failures in one jurisdiction can have global consequences”.
Digital Payments
The widespread adoption of fintech solutions also correlates with the increasing use by criminals and terrorist financiers of online payment methods, everything from e-wallets to prepaid mobile cards.
Fintech solutions, like online payments platforms, are by nature at risk because they’re “high-risk by design” with many B2B payments platforms built to “bank the unbankable”, which are often SMEs in high-risk jurisdictions or sectors.
One particular area of risk highlighted by the FATF is virtual IBANs, which can be used to obscure the destination of funds and beneficial ownership. The UK’s 2025 National Risk Assessment (NRA) described one situation in which an overseas shadow banking platform issued virtual IBANs to 60,000 UK-registered companies. There were no customer checks. This led to over £2.5 billion being laundered annually.
Artificial Intelligence (AI)
AI’s risk level also correlates with its adoption amongst society at large, which is why the FATF also flagged it as an emerging risk across financial sectors, including VASPs and MVTS.
AI can automate money mule recruitment from end to end or be trained to mimic human behaviour and move funds in a human-like way. It can also swamp AML systems with noise to obscure criminal activity.
Even more concerning is that AI has given the public a freely available, high-value means of creating fake IDs. According to one researcher, creating fake IDs that bypass automated screening can be forged using popular LLMs like ChatGPT. This poses an enormous challenge to online onboarding in digital-first fintechs.
The FATF recommends two things: enhanced due diligence and international cooperation.
Future risks: Online gaming and the Metaverse are flagged as future TF risks due to new blockchain-based technologies and evolving platforms.
Global Risk Requires Access to Multiple Jurisdictions
Poor data access, slow verification processes, and inadequate cross-jurisdictional coordinations places nations on the grey list because they make them more at risk of money laundering and terrorist financing. Financial institutions and other regulated entities fall into the same trap.
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Frequently Asked Questions
What is the difference between the FATF grey list and black list?
The FATF grey list (officially "Jurisdictions under Increased Monitoring") includes countries with strategic AML/CFT deficiencies that have committed to addressing them. The black list (officially "High-Risk Jurisdictions Subject to a Call for Action") includes countries that pose significant threats and face countermeasures from all FATF members. Currently, only Iran and North Korea are black-listed, while 23+ countries are grey-listed as of 2025.
How long does it typically take for a country to be removed from the FATF grey list?
The average time on the grey list is 3-4 years, but it varies significantly. Albania was removed after 9 years (2014-2023), while some countries, like Panama, were removed in under 2 years. The Philippines' recent removal in February 2025 took approximately 5 years. Countries demonstrating rapid prosecution improvements and high-profile enforcement actions can accelerate their removal timeline.
What is the financial impact of FATF grey listing on a country?
Grey listing typically causes a 7-10% GDP decline over 3-5 years through reduced foreign direct investment, higher borrowing costs, and banking relationship restrictions. Pakistan lost an estimated $38 billion between 2008-2021. Turkey experienced significant currency pressure and banking sector challenges during its grey-list period (2021-2024). The impact is most severe for countries dependent on international banking relationships and foreign investment.
Can financial institutions be penalised for maintaining relationships with grey-listed countries?
While grey listing doesn't impose automatic sanctions, financial institutions must apply enhanced due diligence when dealing with grey-listed jurisdictions. Failure to implement appropriate risk management measures can result in regulatory penalties. Many international banks voluntarily restrict or terminate relationships with grey-listed countries to avoid compliance risks, creating a de facto economic impact.
Which countries are most likely to be added to the FATF grey list next?
Countries showing declining prosecution rates, increasing corruption levels, or significant exposure to sanctioned entities face elevated grey-listing risk. Current indicators suggest increased scrutiny of jurisdictions with poor beneficial ownership transparency, inadequate sanctions implementation (particularly Russia-related sanctions), or declining international cooperation metrics. The FATF's shift toward outcome-based assessment makes prosecution statistics the most reliable predictor.
