FATF October 2025 Update: Understanding the Impact of Grey Listing and Delisting

The Financial Action Task Force (FATF) - the global standard-setter for Anti-Money Laundering and Counter-Terrorist Financing (AML/CFT) - publishes updates after each plenary meeting, typically held in February, June, and October. These updates identify jurisdictions that are under increased monitoring (the “grey list”) and those subject to high-risk countermeasures (the “black list”). 

The most recent statement, issued on 24 October 2025, provides important developments in global AML/CFT compliance and reveals trends in how the FATF’s decisions impact economies, markets, and international relationships. 

Highlights from the FATF October 2025 Update 

• The standout feature of the October 2025 FATF statement is the record removal of four jurisdictions from the grey list: 

Burkina Faso 

Mozambique 

Nigeria 

South Africa 

Delisting signals recognition of the improved compliance and sustained commitment to global standards for these countries. 

• Deferred Reporting: Bolivia, Haiti, Lebanon, the Virgin Islands (UK), and Yemen have deferred reporting; their progress updates are therefore based on earlier FATF reviews and may not reflect their current status. 

• Specific Concern – Venezuela: The FATF has expressed concern regarding Venezuela’s oversight of the Non-Profit Organisation (NPO) sector. It urged authorities to review or amend parts of the November 2024 NPO law to ensure alignment with a risk-based approach. 

What It Means to Be on the FATF Grey List 

When a jurisdiction is placed on the FATF grey list (formally “Jurisdictions under Increased Monitoring”), it indicates that the country has strategic deficiencies in its AML/CFT/CPF systems but has committed to address them within agreed timelines under FATF supervision. 

While this process supports compliance improvement, it also brings with it a series of economic and financial side effects. 

Although FATF listing is not a sanction, it is widely interpreted as a warning signal to global investors, donors, and financial institutions. Research and data analyses over multiple phases (notably 2008–2019) reveal consistent patterns of economic impact following a grey listing. 

1. Reduced Access to Aid and Development Finance 

Listed countries often experience a decline in capital inflows, aid and development finance. 

2. Increased Borrowing Costs 

FATF listing tends to be viewed negatively by investors and lenders. This can lead to wider sovereign bond spreads and higher market borrowing costs. 

3. Slower Economic Growth 

Empirical studies have shown a significant correlation between FATF listing and a fall in GDP growth. This may be linked to reduced capital inflows and investor confidence. 

4. Currency Depreciation 

Grey listing is often followed by exchange rate pressure as market sentiment weakens. 

5. Decline in Market Capitalisation 

Between 2008 and 2015, FATF listings correlated with a drop in stock market capitalisation of listed countries’ firms. 

6. De-Risking and Banking Isolation 

Perhaps the most visible impact is the loss of correspondent banking relationships (CBRs). International banks, wary of compliance risk and potential fines, may cut ties with financial institutions in listed countries - a phenomenon known as de-risking. 

Evolving Impacts: More Balanced Outcomes Since 2016 

Interestingly, data from Phase III (2016–present) show less negative or even mildly positive correlations between listing and economic performance. 

• Market Adjustment: Markets may now anticipate that a listing will be temporary, softening initial reactions. 

• Positive Indicators: Recent analyses found that listings were sometimes linked with improved market capitalisation and declines in non-performing loans, reflecting market optimism about forthcoming reforms and delisting. 

This shows that the impact of listing, while a setback, is also a means for the market to anticipate “a light at the end of the tunnel”. This has softened the blow of the listing and yet, increased the effort and commitment shown toward enhancement of AML procedures, to get delisted. 

Broader Implications for the Global Financial System 

FATF’s monitoring process serves not only the listed country but also the wider international system. 

1. Protecting Financial System Integrity 

Listing a jurisdiction sends a clear risk signal to global institutions. It acts as a preventive measure to protect the integrity of cross-border finance by identifying potential weak points in AML/CFT defences. 

2. Compliance Burden on Global Institutions 

Financial institutions dealing with listed countries must reassess their risk exposure and, in many cases, apply enhanced due diligence (EDD). 

• For High-Risk Jurisdictions (Black List), FATF explicitly calls for countermeasures and heightened scrutiny. 

• For Grey-Listed Jurisdictions, FATF does not mandate EDD but encourages institutions to factor the listing into their risk-based approach. 

However, the reality is that many institutions adopt over-compliance, especially given the potential regulatory penalties for AML failures. 

3. De-Risking and Trade Challenges 

Even without FATF’s direct call for EDD, the practical result is often increased transaction costs, stricter onboarding, or cessation of correspondent relationships. This can hinder trade, remittances, and financial inclusion. 

4. Humanitarian Considerations 

FATF has repeatedly reminded member countries that their risk-based actions should not obstruct legitimate financial flows, especially for humanitarian aid, NPOs, and remittances.  

The October 2025 FATF update reinforces two key lessons: 

1. The FATF process remains a crucial driver of AML/CFT reforms globally. 

2. The economic and reputational consequences of being listed - even temporarily - can be significant, underscoring the importance of sustained compliance and early remediation. 

For the countries recently delisted, the move marks an important milestone toward restored investor confidence and smoother international engagement. For those still under increased monitoring: continued reform and transparent progress reporting are essential steps toward removal and recovery. 

References 

1. Financial Action Task Force (FATF) – Public Statement, 24 October 2025. 

2. FATF – Methodology for Assessing Technical Compliance and Effectiveness. 

3. International Monetary Fund (IMF) and World Bank Studies on FATF Listing Impacts (Periods I–III, 2008–2019). 

4. FATF Guidance on De-Risking and Financial Inclusion (2023). 

5. FATF – Consolidated Assessment Ratings and Jurisdictional Monitoring Lists.