Foreign Exchange dealers and Full-Fledged Money Changers (FFMCs) in India must monitor global anti-money laundering and counter-terrorist financing (AML/CFT) frameworks. The Financial Action Task Force (FATF) publishes two key lists — the "High-Risk Jurisdictions Subject to a Call for Action" (commonly called the black list) and the "Jurisdictions under Increased Monitoring" (commonly called the grey list). These lists have direct operational and compliance implications for FFMCs authorised by the Reserve Bank of India (RBI).
What the FATF lists mean for FFMCs
The FATF lists are global assessments of jurisdictional AML/CFT deficiencies. For FFMCs, the main implications are:
- Enhanced due diligence (EDD): Increased scrutiny on customers, transactions and documents when dealing with persons or counterparties from listed jurisdictions.
- Restricted or cautious business relationships: Some correspondent relationships or remittance corridors may be discouraged or require senior management approval.
- Regulatory reporting: Heightened focus from Indian regulators (RBI, FIU-IND) on transactions that involve high-risk jurisdictions, with potential for more Suspicious Transaction Reports (STRs) and enquiries.
- Operational controls: Need for strengthened KYC, transaction monitoring, sanctions screening and record-keeping.
The FATF "black list" (High-Risk Jurisdictions)
The FATF black list includes jurisdictions subject to a "Call for Action" due to serious strategic deficiencies in their AML/CFT regimes. As of the most recent FATF statements, the jurisdictions on the black list are:
- Democratic People’s Republic of Korea (North Korea)
- Iran (Islamic Republic of)
FFMCs should treat transactions involving these jurisdictions as extremely high risk. Many financial institutions restrict or prohibit business with entities from blacklisted jurisdictions. Any such business should be escalated to senior compliance and legal teams and, where relevant, reported to the RBI and FIU-IND.
The FATF "grey list" (Jurisdictions under Increased Monitoring)
The grey list comprises jurisdictions that have committed to resolve identified strategic AML/CFT deficiencies within agreed timeframes and are under increased monitoring by the FATF. Jurisdictions on the grey list are subject to ongoing review and the list changes as countries make progress or regress.
Because the grey list is updated periodically, FFMCs must maintain an active process to monitor the FATF website and circulars from RBI/FIU-IND. Transactions involving grey-listed jurisdictions require enhanced due diligence and often additional documentation and senior approval. Examples of enhanced measures include:
- Obtaining and verifying source-of-funds and source-of-wealth information.
- Applying stricter transaction limits and closer scrutiny of transaction purpose.
- Applying enhanced screening for politically exposed persons (PEPs) and sanctions lists.
How FFMCs should operationalise FATF list monitoring
- Keep an authoritative source list: Use the FATF website as the primary source and subscribe to FATF updates. Cross-check with RBI circulars where India-specific guidance is issued.
- Update risk matrix and policies: Reflect changes in the FATF lists in your AML/CFT risk matrix, customer acceptance policy, and transaction monitoring rules.
- Train front-line staff: Ensure branch staff and relationship managers understand procedures for enhanced due diligence and escalation.
- Strengthen screening systems: Ensure sanctions and PEP screening tools are current and include flagged jurisdictions.
- Document decisions: Maintain clear records of risk assessments, approvals and any STRs filed in connection with high-risk jurisdictions.
Regulatory and business considerations in India
The RBI and FIU-IND expect regulated entities, including FFMCs, to align their AML/CFT frameworks with FATF standards. Non-compliance can result in supervisory action, reputational harm, and operational restrictions. Practical steps for FFMCs include integrating FATF list checks into KYC onboarding, remittance processing and travel currency services, and ensuring that any LRS-related foreign remittances are screened appropriately.
Note: The FATF lists are periodically revised. Always verify the current lists on the FATF website and follow any RBI/FIU-IND advisories.
Summary and next steps
For FFMCs, FATF black and grey lists are essential inputs to an effective AML/CFT program. Blacklisted jurisdictions (e.g., DPRK and Iran) pose the highest level of risk and generally warrant refusal or extreme caution. Grey-listed jurisdictions require enhanced monitoring and documented risk-based controls. Maintain up-to-date lists from FATF, adapt internal policies promptly, train staff, and escalate suspicious activities to the appropriate authorities.
If you need assistance updating your FFMC compliance manual, transaction screening rules, or staff training to reflect FATF obligations, contact Best Deal Forex. We can help assess AML/CFT impact on your operations and provide practical compliance support and quotes for services.
