Excerpt from The Diplomat
In January 2015 the Asia/Pacific Group on Money Laundering (APG) reported one of its member jurisdictions for serious anti-money laundering and counterterrorist financing (AML&CTF) deficiencies. The member in question was Vanuatu: a sprinkling of volcanic islands in the South Pacific, with a population of barely 300,000 Ni-Vanuatu. The Financial Action Task Force (FATF), responding to the APG at its February 2016 plenary session in Paris, placed Vanuatu on its dreaded grey list.
The FATF represents 39 member nations and organizations, including the APG, and was created in 1989 by the G-7 to spearhead anti-money laundering and, later, counterterrorist financing efforts. By setting world standards for financial compliance, it also functions as the gatekeeper for international trade. And that’s precisely where this story begins.
The FATF black list is a formidable instrument. Only North Korea and Iran enjoy full pariah status on the list. But even grey-listing has ramifications, complicating international fund transfers, foreign direct investment, and correspondent banking. It’s tantamount to a global bureaucratic shunning, as other financial centers embargo the listed party.
In Vanuatu’s case, Australian and U.S. banks responded by closing their correspondent accounts in Vanuatu and thereby tarring this island nation as a high-risk place for business. For a small though resolutely independent country struggling to achieve developing nation status, grey-listing amounted to full-on economic sanctions.
It’s worth noting that the FATF listing was not because of any evidence of money laundering. The punishment was for legislation and oversight deemed not tough enough.
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