Financial Action Task Force Action Plan.

17/06/2022 Jonathan Garcia, James Montado, Steven Caetano

FATF Action Plan

The Financial Action Task Force (FATF) has identified Gibraltar as a jurisdiction under increased monitoring and has released an Action Plan which Gibraltar needs to complete by May 2023.

The findings are in respect of only two points relating to:

  1. Pursuing regulatory sanctions
  2. Pursuing final confiscation judgements

HMGOG has confirmed it fully accepts this Action Plan and is committed to show full compliance within the timeframe.

HMGOG highlighted the fact that the Mutual Evaluation Report by Moneyval originally contained seventy-eight recommended actions therefore having reduced the total number of recommended actions by seventy-six and will continue to work closely with the FATF in order to address these two points.

What does this mean?

Gibraltar being  grey listed does not have an immediate perceived effect for purely local businesses, but international clients and other jurisdictions seeking to do business with Gibraltar who are subject to equivalent AML/CFT measures derived from the FATF 40 Recommendations will need to have regard to the deficiencies and may consider Gibraltar a “Medium” to “High” risk jurisdiction in which to do business. This means Gibraltar residents (or entities) seeking to do business outside of Gibraltar and Gibraltar-based ultimate beneficial owners are likely to be subject to greater scrutiny from other jurisdictions, who may seek to apply enhanced due diligence measures when taking their business on. The extent to which this applies will vary depending very much on each individual situation. Please contact our team should you require any assistance in this area.

A secondary effect will be that Gibraltar will need to take immediate steps for remediation, which may lead to revisions in laws and regulatory requirements, enhanced regulatory oversight and scrutiny, which in turn could increase the overall cost of compliance. In addition, law enforcement bodies and the judiciary will be under increased pressure to issue fines and more severe penalties for convictions relating to financial crime, as well as increase investigatory efforts to uncover ML/TF/PF within the jurisdiction.

Gibraltar-based financial institutions and designated non-financial business persons (“DNFBPs”) may therefore see increased reporting and due diligence being requested from their counterparts, stakeholders, and business partners in jurisdictions outside of Gibraltar.

However, it is important to note and understand that this greylist categorisation is not to be confused with the “blacklist” or highest risk categorisation which is High-Risk Jurisdictions subject to a Call for Action (as at October 2021, this includes (i) Iran and (ii) Democratic People’s Republic of Korea (DPRK)).

Looking Ahead

Given that the Action Plan is only in respect of two points, the jurisdiction is confident it will be able to remove itself from the greylist in the shortest possible time. Interestingly, Malta was added to the greylist in June 2021, and has managed to successfully address the identified deficiencies within one year, having just been removed from the greylist at the same June 2022 Plenary.

Gibraltar has already seen a significant increase in prosecutions and successful convictions for ML offences, as well as significant efforts from the Gibraltar Financial Intelligence Unit to establish cooperation mechanisms aimed at generating intelligence and using this effectively in the fight against financial crime; the most recent example being the a public-private partnership between the Royal Gibraltar Police, HM Customs, the GFSC and a number of banks in Gibraltar known as the Financial Liaison and Intelligence Network (“FLINT”) announced on 14 June 2022.

ISOLAS LLP has been involved in the MONEYVAL process and has drafted a number of amendments to legislation aimed at delivering on Gibraltar’s technical compliance, advising HMGOG, National Coordinator for Anti-Money Laundering and the Combatting of Terrorist Financing, and the Gibraltar Financial Services Commission with respect to 5AMLD implementation and in drafting the Proceeds of Crime (Miscellaneous Amendments) Act 2021. We will continue to support the initiatives from  HMGOG, MONEYVAL and all relevant Gibraltar Authorities to address the remaining deficiencies with a view to achieving revised scores at the next follow-up visit and being removed from the greylist as soon as possible thereafter.

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