FATF grey list
Also written Grey list · FATF greylist · Jurisdictions under increased monitoring
The informal name for FATF's list of jurisdictions under increased monitoring — countries working with FATF that have committed to fix identified strategic deficiencies swiftly within agreed timeframes.
In plain language
The grey list is FATF's middle category. A country on it has problems in its defences against money laundering, terrorist financing and proliferation financing — but it has admitted them and agreed to fix them.
The workbook describes it as the part of FATF's statement identifying countries actively working with the FATF to address strategic deficiencies in their regimes. When 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. That list is often externally referred to as the grey list.
The distinction that matters for the exam is the direction of travel. A black-list country is being warned about; a grey-list country is being watched while it repairs itself.
How it works
Publication. Like the black list, the grey list comes out of the two FATF public documents or statements issued three times a year in which FATF identifies jurisdictions with weak AML/CFT measures.
The three elements of a grey listing, in the workbook's words:
- the country is actively working with the FATF to address strategic deficiencies
- it has committed to resolve swiftly the identified strategic deficiencies within agreed timeframes
- it is subject to increased monitoring
What the workbook does and does not prescribe. For black-listed, high-risk countries the workbook records FATF's call for enhanced due diligence and, in serious cases, counter-measures. It attaches no equivalent call to the grey list. What the SEBI framework does require is that geography be assessed:
- Rule 9(13) requires the risk assessment to cover countries or geographic areas.
- SEBI's client acceptance policy makes the client's location — registered office, correspondence address and any other relevant address — a defined risk factor for classifying clients as low, medium or high risk.
- The risk assessment must take into account country specific information circulated by the Government of India and SEBI.
So a grey listing is an input to that judgement, not an automatic rule.
Why it matters to India. Chapter 1 records that India became a member of FATF in 2010 and is also a member of two FATF-style regional bodies, the Asia Pacific Group (APG) and the Eurasian Group (EAG) — the network through which mutual evaluations of member jurisdictions are carried out.
A worked example
Illustrative. "Country Y" stands for any jurisdiction under increased monitoring; the workbook names none.
Nirmal Securities Ltd reviews its client base after an FATF statement adds Country Y to the list of jurisdictions under increased monitoring. It has 140 clients with a registered or correspondence address in Country Y, holding Rs 86 crore between them.
What it does not do. It does not close the 140 accounts, and it does not reclassify all of them as high risk overnight. Nothing in the workbook requires either.
What it does.
| Action | Basis |
|---|---|
| Updates its documented risk assessment to reflect the listing | Rule 9(13): geography is a mandatory factor; the assessment must be kept up to date |
| Re-runs client risk classification for the 140, using location as one factor alongside business, turnover and payment mode | SEBI client acceptance policy, section 6.2.2(b) |
| Moves 12 clients whose funds also arrive from unrelated third parties into high risk | Location plus other risk factors |
| Leaves 128 salaried NRIs with modest, consistent activity in their existing category, with monitoring aligned to it | Extent of monitoring aligned with risk category |
Check: 12 + 128 = 140.
If Country Y later moves to the black list, the analysis changes: clients in high-risk countries are Clients of Special Category, and enhanced due diligence applies to all of them.
Why NISM asks about it
Chapter 5 (AML, CFT and PF Guidelines), section 5.2.4, defines the grey list next to the black list, and the chapter's own sample question asks which list holds the countries subject to increased monitoring. Chapter 1, section 1.3.2, supplies India's FATF membership and the FSRBs, and Chapter 6, sections 6.2.2 and 6.2.5, supply the geography factor in client classification and risk assessment.
Common exam traps
- Increased monitoring = grey. High risk with serious strategic deficiencies = black. The workbook's sample question is exactly this.
- A grey-list country is cooperating. It is actively working with FATF and has committed to fix its deficiencies within agreed timeframes.
- "Swiftly within agreed timeframes" — the commitment is time-bound, not open-ended.
- The workbook attaches the enhanced-due-diligence and counter-measures call to high-risk (black-list) countries, not to the grey list. Do not import counter-measures into a grey-list answer.
- "Grey list" is an external label, like "black list" — neither is FATF's formal name in the workbook.
- India joined FATF in 2010, and its FSRBs are APG and EAG.
Where this is taught
Free preparation for NISM Series XXIVRelated terms
- FATFThe intergovernmental body founded in 1989 that writes the global AML/CFT standards — the 40 Recommendations plus IX Special Recommendations — and grey-lists or black-lists countries that fail them.
- Clients of Special CategoryA named list of client types — NRIs, HNIs, trusts, NGOs, PEPs, non-face-to-face clients and others — on whom SEBI requires enhanced due diligence rather than the ordinary standard.
- FATF black listThe informal name for FATF's public statement of jurisdictions with serious strategic AML/CFT/PF deficiencies, on which FATF calls for enhanced due diligence and, in the most serious cases, counter-measures.
- Risk assessmentAn intermediary's documented, up-to-date assessment of its own money-laundering and terrorist-financing risk across clients, geographies, transactions and payment channels — and of new products before launch.
- Risk Based ApproachApplying each due diligence measure in proportion to the money-laundering risk a client poses — enhanced diligence for higher-risk clients, simplified for lower-risk, never simplified where suspicion exists.
- Correspondent bankingAn arrangement in which one bank, the correspondent, provides services such as wire transfers, currency exchange and trade finance to another, the respondent, in a market where the respondent has no presence.
- FATF Style Regional BodiesThe nine regional counterparts of the FATF — APG, CFATF, EAG, ESAAMLG, GABAC, GAFILAT, GIABA, MENAFATF and MONEYVAL — which with FATF form the global AML/CFT network; India belongs to APG and EAG.
- FATF PlenaryThe FATF's decision-making body, meeting three times a year, which holds countries to account for non-compliance and can name them Jurisdictions under Increased Monitoring or High Risk Jurisdictions.
- FATF PresidentThe senior official the FATF Plenary appoints from among its members to chair the Plenary and the Steering Group, serving a two-year term that runs from 1 July to 30 June.