Circular No. 2 of 2024 - FATF Statements on High Risk Jurisdictions

Circular No. 2 of 2024
Date: 29 th July, 2024
Financial Action Task Force (“FATF”) statements concerning:

1. Jurisdictions subject to a FATF call on its members and other jurisdictions to apply
   countermeasures.
2. High-risk jurisdictions subject to a FATF call on its members and other jurisdictions to apply
   enhanced due diligence measures proportionate to the risks arising from the jurisdiction.
3. Jurisdictions under increased monitoring of the FATF.
   The Financial Services Authority (“FSA”) would like to draw the attention of all reporting entities to the following decisions taken by the FATF during its plenary meeting of June 26 th to 28 th , 2024 concerning the countries placed under increased monitoring.

1. JURISDICTIONS SUBJECT TO A FATF CALL ON ITS MEMBERS AND OTHER JURISDICTIONS TO APPLY
   COUNTERMEASURES
   High-risk jurisdictions have significant strategic deficiencies in their regimes to counter money￾laundering, terrorist financing and financing of proliferation. For all countries identified as high-risk, the FATF calls on all members and urges all jurisdictions to apply enhanced due diligence, and, in the most serious cases, countries are called upon to apply counter-measures to protect the international financial system from the money laundering, terrorist financing and proliferation financing (ML/TF/PF) risks emanating from the country. This list is often externally referred to as the “black list”. Despite the calls by FATF on its members and other jurisdictions to apply countermeasures, Democratic People’s Republic of Korea (DPRK) has increased connectivity with the international financial system, which raises PF risks. This requires greater vigilance and renewed implementation and enforcement of these countermeasures against the DPRK. As set out in UNSCR 2270, DPRK frequently uses front companies, shell companies, joint ventures and complex, opaque ownership structures for the purpose of violating sanctions. As such, FATF encourages its members and all countries to apply enhanced due diligence to the DPRK and its ability to facilitate transactions on its behalf. Iran reported in January 2024 with no material changes in the status of its action plan. Given heightened proliferation financing risks, the FATF reiterates its call to apply countermeasures on these high-risk jurisdictions.

2. HIGH-RISK JURISDICTIONS SUBJECT TO A FATF CALL ON ITS MEMBERS AND OTHER JURISDICTIONS
   TO APPLY ENHANCED DUE DILIGENCE MEASURES PROPORTIONATE TO THE RISKS ARISING FROM THE JURISDICTION In February 2020, Myanmar committed to address its strategic deficiencies. Myanmar’s action plan expired in September 2021. In June 2022, the FATF strongly urged Myanmar to swiftly complete its action plan by October 2022 or the FATF would call on its members and urge all jurisdictions to apply enhanced due diligence to business relations and transactions with Myanmar. Given the continued lack of progress and the majority of its action items still not addressed after a year beyond the action plan deadline, the FATF decided that further action was necessary in line with its procedures and FATF calls on its members and other jurisdictions to apply enhanced due diligence measures proportionate to the risk arising from Myanmar. When applying enhanced due diligence measures, countries should ensure that flows of funds for humanitarian assistance, legitimate NPO activity and remittances are not disrupted. Since October 2023, Myanmar took steps to prioritize inspection of certain DNFBP sectors on a risk basis. However, overall progress continues to be slow, meaning Myanmar should continue to work on implementing its action plan to address these deficiencies. The FATF has urged Myanmar to fully address its AML/CFT deficiencies, including to demonstrate that its monitoring and supervision of money or value transfer services is based on documented and sound understanding of ML/TF risks to mitigate undue scrutiny of legitimate financial flows. Myanmar will remain on the list of countries subject to a call for action until its full action plan is completed. The following web link to the FATF’s website provides for the list of high-risk jurisdictions subject to a call for action as identified by the FATF:
   https://www.fatf-gafi.org/en/publications/High-risk-and-other-monitored-jurisdictions/Call-for￾action-june-2024.html

3. JURISDICTIONS UNDER INCREASED MONITORING
   Jurisdictions under increased monitoring are actively working with the FATF to address strategic deficiencies in their regimes to counter money laundering, terrorist financing, and proliferation financing. When the FATF places a jurisdiction under increased monitoring, it means the country has committed to resolve swiftly the identified strategic deficiencies within agreed timeframes and is subject to increased monitoring. The FATF calls for the application of a Risk-Based approach and encourages its members and all jurisdictions to consider the information presented through the link below in their risk analysis. New jurisdictions subject to increased monitoring: Monaco and Venezuela The following web link to the FATF website provides for the list of jurisdictions under increased monitoring as identified by the FATF:
   https://www.fatf-gafi.org/en/publications/High-risk-and-other-monitored￾jurisdictions/increased-monitoring-june-2024.html

Jurisdictions no longer under Increased Monitoring – Jamaica and Türkiye The FATF plenary congratulated Jamaica and Türkiye for their significant progress in addressing the strategic AML/CFT deficiencies previously identified during their mutual evaluations. These jurisdictions had committed to implement an Action Plan to resolve swiftly the identified strategic deficiencies within agreed timeframes. These countries will no longer be subject to the FATF’s increased monitoring process. Both countries will continue to work with the FATF-Style Regional Body, of which it is a member, to sustain the improvements in their AML/CFT/CPF regimes. All reporting entities are hereby guided to refer to the following link to the FATF website concerning the outcomes of the June 26th to 28th, 2024 Plenary. https://www.fatf-gafi.org/en/publications/Fatfgeneral/outcomes-fatf-plenary-june-2024.html
4. OBLIGATION TO APPLY ENHANCED DUE DILIGENCE AND ENHANCED ON-GOING MONITORING TO
HIGHER RISK JURISDICTIONS
Section 41(3) of the Anti-Money Laundering and Countering the Financing of Terrorism Act, 2020
(“AML/CFT Act”) and Regulation 16 of the Anti-Money and Countering the Financing of Terrorism Regulations, 2020 (“AML/CFT Regulations”) call for all reporting entities to apply enhanced due diligence measures and enhanced ongoing monitoring required under section 35 of the AML/CFT Act on a risk-sensitive basis, in any situation which by its nature presents a higher risk of money laundering, terrorist financing activities or other criminal conduct, or in respect of a business relationship with persons from, and transactions in, countries which do not apply or fully apply the FATF Recommendations. All reporting entities are required to ensure that they remain up to date with the information provided by the FATF in regards to high-risk and other monitored jurisdictions and are aware of any changes or updates made to these two lists published by FATF. Reporting entities are reminded of the importance of complying with their obligations under Section 41(3) of the AML/CFT Act and Regulation 16 of the AML/CFT Regulations to apply enhanced due diligence and enhanced monitoring in relation to business relationships and transactions with natural and legal persons (including financial institutions) from countries for which this is called for by the FATF. Reporting entities are also being called upon to undertake the following additional actions (at a minimum) to demonstrate compliance with the above requirement:

• In relation to High-Risk Jurisdiction Subject to a Call for Action

• consult the FATF public documents which are published on the website of the FATF
  (https://www.fatf-gafi.org/) on a continuous basis to identify any changes and apply the countermeasures recommended by the FATF in those documents;

• give special attention to business relationships and transactions with persons (both
  natural and legal persons) in those high-risk countries, including companies, legal arrangements/trusts and financial institutions based in those countries;

• strengthen systems and controls in managing their exposure to the vulnerabilities
  identified by FATF; and

• ensure that correspondent relationships, in particular, are not being used to evade
  countermeasures and risk mitigation practices.

• In relation to Jurisdictions under Increased Monitoring

• to take into consideration the information published by the FATF relating to these
  jurisdictions in their risk assessments; and

• to review the FATF’s website on a continuous basis to identify whether any changes or
  updates have been published by the FATF.
  In the event of any updates, the FSA will also be notifying reporting entities accordingly. Failure to comply with Section 41(3) of the AML/CFT Act and Regulation 16 of the AML/CFT Regulations shall lead to the FSA taking relevant enforcement actions as provided for by relevant legislations. The FSA counts on the usual cooperation of reporting entities in maintaining effective systems of controls in safeguarding the integrity of Seychelles. Reporting entities may contact the FSA, through email at amlcft@fsaseychelles.sc, for any clarification or further information regarding the content of this Circular. FINANCIAL SERVICES AUTHORITY