FATF

FATF stands for the Financial Action Task Force, which is an intergovernmental organization that develops policies to combat money laundering and terrorist financing. The FATF maintains a list of countries that have been identified as having strategic deficiencies in their regimes to counter money laundering, terrorist financing, and proliferation financing (financing of mass destruction weapons). These lists are often referred to as the FATF Blacklist and Greylist.

FATF Blacklist: Countries on this list are considered non-cooperative in the global fight against money laundering and terrorist financing. They have significant strategic deficiencies in their legal systems.

FATF Greylist: Countries on the Greylist are under increased monitoring. They have committed to resolve swiftly the identified strategic deficiencies within agreed timeframes and are subject to extra checks and scrutiny.

EMIs (Electronic Money Institutions) typically avoid working with countries on the FATF list for several reasons:

1. Regulatory Compliance: EMIs are required to adhere to strict regulatory standards, and working with countries on the FATF list could imply potential non-compliance with international anti-money laundering (AML) and counter-terrorist financing (CTF) standards.
2. Reputational Risk: Associating with countries on the FATF list can carry a reputational risk, which might affect the trust of customers and partners.
3. Operational Risks: There is an increased risk of fraudulent transactions and illegal activities when operating with countries that have weaker financial regulations.
4. Sanctions and Penalties: Engaging in financial transactions with countries on the FATF list might result in sanctions and penalties from both international bodies and domestic regulators.
5. Banking and Correspondent Relationships: Maintaining relationships with banks and financial institutions around the world could be jeopardized if an EMI is found to be non-compliant with FATF recommendations, as these institutions might refuse to process transactions related to blacklisted or greylisted countries.

Therefore, to avoid these risks and to ensure compliance with AML and CTF regulations, EMIs exercise caution and may choose not to provide services in these jurisdictions.