FATF Grey List Updates: What Compliance Teams Need to Know for 2025–2026

Introduction

The Financial Action Task Force (FATF) is the global standard-setter for anti-money laundering (AML) and counter-terrorist financing (CFT). Its plenary meetings, held three times a year, produce updates to the grey list—jurisdictions under increased monitoring—and the blacklist of high-risk jurisdictions. These updates directly affect cross-border transactions, correspondent banking relationships, and the compliance obligations of financial institutions worldwide.

For compliance teams, staying abreast of FATF grey list changes is not optional. Failure to apply enhanced due diligence (EDD) to transactions involving listed jurisdictions can result in regulatory penalties, reputational damage, and exposure to financial crime. This article provides a comprehensive analysis of the latest FATF plenary outcomes, their implications for AML compliance, and actionable steps to adjust your screening and monitoring processes.

Overview of FATF Plenary Outcomes and Grey List Changes

The FATF has continued to refine its grey list based on jurisdictions' progress in addressing AML/CFT deficiencies. According to recent FATF announcements, several countries have been added to or removed from the list over the past year. For example, jurisdictions such as Bosnia and Herzegovina, Iraq, Kuwait, and Papua New Guinea were identified as requiring increased monitoring, while Algeria, Namibia, and the Philippines were removed after demonstrating sufficient progress.

These changes reflect the FATF's ongoing assessment of national AML/CFT frameworks. The grey list currently includes over 20 countries, each with specific action items that must be completed to exit the list. The FATF also issues public statements on jurisdictions with strategic deficiencies, urging member countries to apply countermeasures.

For compliance teams, the key takeaway is that the grey list is dynamic. Regular monitoring of FATF plenary outcomes is essential to ensure that screening lists are up to date and that EDD measures are applied correctly.

Impact on Cross-Border Transactions and Correspondent Banking

When a jurisdiction is added to the FATF grey list, financial institutions must apply enhanced due diligence to all transactions and business relationships involving that jurisdiction. This includes:

• Increased scrutiny of customer due diligence (CDD): Collecting additional information on the customer's source of funds, business purpose, and beneficial ownership.
• Enhanced transaction monitoring: Applying lower thresholds for suspicious activity reports (SARs) and closer review of transactions to and from grey-listed jurisdictions.
• Restrictions on correspondent banking: Correspondent banks may restrict or terminate relationships with banks in grey-listed jurisdictions to mitigate risk.

Correspondent banking is particularly sensitive. Banks in grey-listed countries often face de-risking, where foreign banks sever correspondent relationships to avoid regulatory exposure. This can disrupt trade finance, remittances, and other cross-border flows. Compliance teams must assess the impact on their own correspondent network and consider alternative routing or enhanced monitoring.

Enhanced Due Diligence Requirements for Jurisdictions Under Increased Monitoring

The FATF's recommendations on EDD for high-risk jurisdictions are outlined in Recommendation 19. Financial institutions are expected to:

• Apply EDD measures to business relationships and transactions with natural and legal persons from countries identified as high-risk by the FATF.
• Implement measures to verify the source of funds and wealth of customers from these jurisdictions.
• Maintain enhanced ongoing monitoring of these relationships.

For grey-listed jurisdictions, the FATF does not require automatic application of countermeasures, but it expects member countries to advise their financial institutions to apply EDD. The specific measures may vary depending on the country's deficiencies. For example, if a jurisdiction has weak beneficial ownership transparency, institutions should pay extra attention to ownership structures.

Compliance teams should review their EDD policies to ensure they can be dynamically updated when FATF announcements are made. Automated screening systems that integrate real-time sanctions and watchlist updates are critical to maintaining compliance.

Practical Steps for Compliance Teams to Adjust Screening and Monitoring Processes

To respond effectively to FATF grey list changes, compliance teams should take the following steps:

1. Subscribe to FATF alerts and updates. The FATF publishes press releases and public statements after each plenary. Set up automated feeds or use a regulatory intelligence platform to receive real-time notifications.
2. Update screening lists immediately. Ensure that your sanctions and watchlist screening system includes the latest FATF designations. This includes both the grey list and the blacklist (jurisdictions subject to countermeasures).
3. Review and adjust EDD procedures. For newly added jurisdictions, determine the appropriate level of EDD. Consider factors such as the nature of the business, transaction volume, and the jurisdiction's specific deficiencies.
4. Train staff on grey list implications. Front-office and compliance staff should understand the enhanced scrutiny required for transactions involving grey-listed countries. Provide clear guidance on when to escalate.
5. Conduct a portfolio review. Identify existing customers and transactions linked to newly grey-listed jurisdictions. Apply retrospective EDD if warranted.
6. Leverage technology for real-time screening. Manual updates are error-prone and slow. Implement a solution that automatically ingests FATF updates and applies them across your screening and monitoring systems.

Platforms like RisksRadarAI offer real-time sanctions and AML screening that integrates FATF grey list updates directly into your compliance workflow. With automated alerts, cross-domain signal correlation, and AI-powered evidence briefs, RisksRadarAI helps compliance teams stay ahead of regulatory changes and reduce false positives by 80% or more.

Key Takeaways

• The FATF grey list is updated regularly; compliance teams must monitor plenary outcomes to adjust EDD and screening processes.
• Grey list additions increase scrutiny on cross-border transactions and may lead to de-risking in correspondent banking.
• Enhanced due diligence for grey-listed jurisdictions requires dynamic policies and automated systems.
• Technology solutions that provide real-time updates and reduce false positives are essential for efficient AML compliance.