What Is The Cost of Being Greylisted by FATF?

The Financial Action Task Force (FATF) uses a set of tools to promote global compliance with international standards on anti-money laundering (AML), counter-terrorism financing (CFT), and counter-proliferation financing (CPF). Among these tools are the grey list and the black list, which publicly identify jurisdictions with strategic deficiencies in their financial crime frameworks. The goal is to apply pressure for reform and safeguard the integrity of the global financial system.

This article focuses on the Grey List, formally known as Jurisdictions under Increased Monitoring, which includes countries that have acknowledged their deficiencies and committed to working with the FATF or regional bodies to resolve them within agreed timeframes. These shortcomings may include inadequate supervision, weak enforcement, poor beneficial ownership transparency, or ineffective systems for freezing assets linked to illicit activity.

While greylisting is not a sanction, it sends a strong signal that a jurisdiction’s financial system is under increased scrutiny. Although the FATF itself does not impose penalties, the designation often triggers a cautious response from financial institutions, investors, and development agencies. The result is often economic disruption, particularly in developing countries, as access to capital and financial services becomes more restricted.

What Is the Black List and How Is It Different from the Grey List?

While this article focuses on the consequences of being greylisted by the FATF, it is important to understand how the blacklist differs. The FATF “blacklist” is officially known as the list of High-Risk Jurisdictions Subject to a Call for Action. It includes countries with the most serious and persistent deficiencies in their anti-money laundering (AML), counter-terrorist financing (CFT), and counter-proliferation financing (CPF) frameworks. These jurisdictions have either failed to commit to meaningful reforms or have made insufficient progress despite repeated warnings. As of June 2025, the blacklist includes North Korea, Iran, and Myanmar.

Countries on the blacklist face much harsher consequences than those on the grey list. FATF members are required to apply enhanced due diligence, and in some cases, counter-measures such as restricting financial transactions, increasing reporting obligations, or limiting cross-border business activities. Blacklisted jurisdictions often experience near-total financial isolation, reputational damage, a sharp decline in foreign investment, and significantly higher compliance burdens. Unlike the grey list, which signals a willingness to improve, the blacklist reflects systemic non-compliance and a serious breakdown in international trust.

The Consequences of Being Greylisted

1. Loss of investor and banking confidence
   Once greylisted, a jurisdiction's perceived risk increases sharply. Banks may reduce or sever correspondent banking relationships, investors may delay or withdraw capital, and international businesses may seek more compliant environments.
2. Capital outflows and reduced foreign direct investment
   According to IMF research, countries greylisted by the FATF experience a sharp and statistically significant drop in capital inflows averaging 7.6% of GDP. In some jurisdictions, these effects persisted for up to two years, even after remediation began.
3. Trade and remittance disruptions
   Reduced access to international payments infrastructure can directly affect trade settlements, cross-border transactions, and remittances, often hitting the most vulnerable segments of the population. IMF data shows that capital markets and foreign banks adjust rapidly and pre-emptively in anticipation of increased compliance risks.
4. Higher cost of borrowing and financial services
   Countries under monitoring typically experience a rise in sovereign bond yields and borrowing costs for public and private sectors due to increased perceived risk by international lenders.
5. Development financing and aid withdrawal
   Multilateral development banks and donor nations often reassess funding arrangements, leading to cuts in development assistance and delays in infrastructure or social programs.
6. Damage to credit ratings and national reputation
   Greylisting often triggers negative watchlists from rating agencies. Even after a country is removed from the list, the stigma can linger for years, affecting trust in institutions and access to capital markets.
   
   

Case Studies: Real-World Impacts

Pakistan
Greylisted multiple times since 2008, Pakistan faced persistent scrutiny due to deficiencies in terrorist financing oversight, ineffective supervision of non-financial sectors, and gaps in beneficial ownership transparency. According to independent analysis, Pakistan lost over USD 38 billion in GDP by 2019 as a result of decreased investment, export constraints, and slower economic growth. Although it was removed from the grey list in 2022 after completing a 34-point action plan, the economic and reputational impacts have been long-lasting.

Nigeria
Added to the grey list in 2023, Nigeria faced FATF concerns around limited enforcement of AML/CFT regulations, inadequate access to beneficial ownership information, and insufficient outcomes in money laundering and terrorism financing prosecutions. In response, Nigeria enacted legislative reforms, improved coordination among supervisory authorities, and enhanced its financial intelligence dissemination. By 2025, the FATF determined that Nigeria had substantially completed its action plan, warranting an on-site assessment as a final step toward delisting.

South Africa
Greylisted in February 2023, South Africa was cited for weaknesses in effective risk-based supervision, delays in prosecuting complex money laundering cases, and limited transparency in legal arrangements. In response, South Africa introduced legislative changes, strengthened its Financial Intelligence Centre, increased inter-agency collaboration, and demonstrated measurable improvements in asset recovery and terrorist financing risk mitigation. These efforts led the FATF to acknowledge substantial progress and initiate the process for removal from the list in mid-2025.

Philippines
The Philippines was greylisted by the FATF in June 2021 due to weaknesses in customer due diligence, oversight of high-risk sectors like casinos, and monitoring of non-profits vulnerable to terrorist financing. It was removed from the grey list in February 2025 after completing a comprehensive reform plan, including stronger supervision, legislative updates, and improved enforcement of targeted financial sanctions. The FATF recognized the country’s progress but stressed the need for continued vigilance to maintain compliance.

Vietnam
Vietnam was greylisted in June 2023, with the FATF highlighting gaps in the regulation of virtual assets and service providers, lack of risk-based supervision, and limited use of financial intelligence in investigations. Since then, Vietnam has taken steps to reform its legal framework, increase training for law enforcement agencies, and implement better controls around beneficial ownership. Although deadlines have expired for some commitments, the FATF has encouraged continued implementation, signaling that progress is being closely monitored.

Croatia
In contrast to more prolonged greylisting cases, Croatia offers a strong example of quick and coordinated reform. After being placed under increased monitoring in 2023 due to issues including AML/CFT supervision of legal persons, low STR reporting, and gaps in its terrorist financing sanctions regime, Croatia rapidly addressed its action plan. It strengthened enforcement mechanisms, improved FIU capabilities, and conducted targeted outreach to high-risk sectors. By mid-2025, Croatia was removed from the grey list, showing that political will and institutional coordination can lead to swift delisting.

The Economic Risk Facing Current Greylisted Countries

Note: GDP figures are rounded estimates based on IMF research. Loss ranges are based on a 5–10 percent impact assumption.

A Path Forward

Avoiding or exiting the FATF grey list requires more than checklists and policy papers. It demands strategic coordination, political will, and technical expertise. Based on recent international engagements with regulators, registrars, and FATF-style regional bodies, a few key actions stand out:

1. Conduct jurisdiction-wide risk assessments
   Nations must assess AML/CFT risks holistically, including legal structures, trust and company service providers, and non-bank sectors, with detailed oversight strategies for high-risk entities and transactions.
2. Modernize registries to support beneficial ownership transparency
   Recent discussions at the Corporate Registers Forum, EBRA, and IACA show a growing emphasis on linking registry reform to FATF compliance. Accurate, accessible, and up-to-date beneficial ownership data is now a cornerstone of financial integrity systems.
3. Integrate AML/CFT controls into registry operations
   Recent experiences in jurisdictions across Asia, Africa, and the Caribbean highlight the importance of registry operators taking a more active role in supporting AML/CFT efforts. This includes implementing onboarding verification processes, applying risk-based monitoring, and enabling secure information-sharing with financial intelligence units. Integrating these functions into registry systems strengthens national compliance frameworks and supports a coordinated approach to financial integrity.
4. Engage external expertise and cross-agency collaboration
   Rapid remediation and FATF compliance cannot be achieved in silos. Governments that bring in independent specialists and create joint task forces across ministries, supervisory bodies, and enforcement agencies consistently perform better in peer reviews and FATF follow-ups.
5. Demonstrate sustained progress
   The FATF expects not just technical fixes but evidence of effective, ongoing implementation. Countries must be ready to show metrics, increased suspicious transaction reporting, successful prosecutions, asset freezes, and a long-term strategy for maintaining reforms.

Conclusion

The cost of being greylisted is measured not only in billions of lost GDP but in lost credibility, stalled development, and the long road to recovery. Even countries that exit the list quickly often face long-lasting impacts on investment, creditworthiness, and institutional trust. Recovery can take years, and for some, the damage is difficult to fully reverse.

For governments and registry operators, now is the time to act. By addressing weaknesses early, strengthening transparency systems, and engaging with experienced partners like Foster Moore, jurisdictions can build resilience, avoid economic shocks, and show global leadership in financial integrity.

▶️If your jurisdiction is seeking to assess registry maturity, invest in registry modernization, improve beneficial ownership transparency, or prepare for FATF reviews, our team is here to help.

Reach out to learn more about our global advisory experience.

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* This article was developed using insights and notes provided by Julian Lamb of Grosnez Associates Limited.

Julian Lamb is a registry and financial regulation expert with over two decades of experience in government transformation, AML/CFT compliance, and international cooperation. He is a former Registrar and Executive Director at the Jersey Financial Services Commission and has served in leadership roles within IACA, CRF, and EBRA and is a member of Foster Moore’s Advisory Board. Julian now advises governments and institutions on registry modernization, regulatory resilience, and FATF compliance readiness.