Gibraltar Remains on FATF Grey List Despite Progress

The global organization combating financial crime, the Financial Action Task Force on Money Laundering (FATF), has issued a warning to Gibraltar for not making sufficient strides in addressing its shortcomings in preventing money laundering. The FATF has declared that “all deadlines have now expired.”

The FATF maintains a list of countries requiring heightened scrutiny, often referred to as the “grey list.”

Since Gibraltar’s inclusion on this list in June 2022, they have been actively working to enhance their system for curbing money laundering and terrorist financing. Malta, concurrently, was removed from the same list.

The FATF outlined a roadmap for Gibraltar to follow, with a target completion date of May 2023.

The FATF highlighted Gibraltar’s status as a prominent gambling hub as a key factor in its inclusion on the list. They cited the government’s insufficient penalties for violations of money laundering regulations.

The FATF has acknowledged some progress made by Gibraltar. They have implemented measures such as enforcing economic sanctions and increasing the transparency of law enforcement actions.

Nevertheless, the group indicated that following a year on the register, all deadlines have now expired.

Consequently, the Financial Action Task Force on Money Laundering (FATF) encouraged Gibraltar to “promptly” continue carrying out its action plan to address its ongoing strategic shortcomings.

The group stated: “Gibraltar should continue to work on implementing its action plan to address its strategic shortcomings, including demonstrating its ability to pursue more final forfeiture judgments in line with the risks and context of Gibraltar.”

An update on Malta’s progress in addressing its anti-money laundering/counter-terrorism financing vulnerabilities was released on Friday at the conclusion of the FATF’s third plenary meeting, led by T Raja Kumar.

Gibraltar’s Reaction to the FATF

Following the release of the outcomes of the FATF plenary meeting, the Government of Gibraltar responded to the news that the territory would remain on the list. It highlighted that there was only one point requiring action and reaffirmed its commitment to the process.

The government stated: “The Government of Gibraltar acknowledges the update issued by the FATF on 23 June regarding our jurisdiction.”

“Given that there is only one significant action point outstanding, the Government will continue to work diligently to complete its action plan as soon as feasible.

“The Government is fully dedicated to this process, and all regulators and other authorities will continue to collaborate with the FATF to demonstrate our compliance with the action plan.”

In the February gathering of the Financial Action Task Force (FATF), the group recognized Gibraltar’s dedication to cooperating with international organizations. Nonetheless, despite some progress, the absence of action on seizure orders meant the region would remain on the list.

What does being on the gray list signify for Gibraltar?
Gibraltar’s continued presence on the gray list will have repercussions for businesses operating in the area, particularly the jurisdiction’s extensive gambling sector. Gibraltar-based businesses will encounter heightened regulatory examination from both national and global entities, resulting in increased compliance expenses.

Another consequence of being on the list is the enhanced difficulty in securing financial and banking services, as some institutions will be reluctant to engage in transactions with businesses situated in gray-listed nations. This makes establishing bank accounts, obtaining credit lines, or any other form of financial service more demanding.

Opposition criticism
The FATF’s inability to remove Gibraltar from the list has prompted criticism from the right-leaning Gibraltar Social Democratic Party (GSD) in the territory’s opposition.

The party characterized the government’s response to the FATF as “lacking in vigor,” as it lacked specifics on a strategy for achieving removal from the list.

Roy Clinton, the GSD’s shadow minister for financial services and gambling, criticized the current minister for being excessively optimistic.

The Minister responsible for Financial Services, Albert Isola, continues to express hope that Gibraltar will be removed from the list, but he should recognize that there is increasing discontent among the public that this hope has not been realized.

Indeed, in June of 2022, the government had announced that it would demonstrate compliance “at some point,” and that time has now passed.

The Minister should be aware that our financial services sector is enduring the humiliation of being included among high-risk areas like Congo and Haiti.

Given that the Financial Action Task Force on Money Laundering (FATF) deadline has passed, Clinton has urged the Minister to make a statement in the legislature outlining what “practical and immediate actions” are being taken to fulfill the anti-money laundering organization’s requirements.

“They truly should know better”

Following a GSD intervention, the government has denied accusations that the party is engaging in political maneuvering. In an official statement, the government said that the opposition “gave in to the urge to politicize the critical ongoing effort to remove Gibraltar from the FATF grey list.”

“Roy Clinton’s statement has a clear air of political opportunism,” said Albert Isola, the Minister criticized by Clinton. “While the opposition seeks to weaken our efforts, the government remains firmly dedicated to achieving de-listing and restoring the reputation of our jurisdiction.

“It is unfortunate that the opposition has abandoned their previous responsible approach in exchange for a false political gain. They truly should know better.”

Although the GSD opposition has modified their position, I still hope to have a private meeting with them to inform them about the current situation.

I will always be appreciative of our regulatory bodies and law enforcement for their professional handling of the FATF requirements, and I am certain that we will soon be removed from the list.

Malta’s ordeal

Gibraltar isn’t the first global gambling center to be included on the FATF list. In June 2021, the organization added Malta to the list due to “strategic shortcomings” in its anti-money laundering/counter-terrorist financing framework.

After the working group added Malta to the list, it provided the nation with a three-part “action plan” to address its unresolved issues.

These steps included verifying the accuracy of ownership data, clarifying the role of the island’s Financial Intelligence Unit (FIU), and strengthening the FIU’s focus on money laundering and tax evasion.

By February 2022, the FATF declared that Malta had “substantially completed its action plan” and implemented a series of reforms before being taken off the list four months later.

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