The Financial Action Task Force (FATF) added Turkey and two other countries to its ‘grey list.’ The international organisation deals with monitoring and the setting up of guidelines to combat money laundering and terrorism financing. This adds to Turkey’s troubles as is already in the thick of an economic crisis, with its currency rapidly devaluing against the dollar.

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What is the FATF grey list?

The FATF or the Groupe d'action financière (GAFI) is an international intergovernmental agency that was founded in 1989 with backing from the Group of Seven (G7) countries to combat money laundering. After the September 11 terrorist attacks in the US, the mandate of the group was expanded to combat terror financing as well.

Since then the organisation has been responsible for setting guidelines for the legal, regulatory and operational measures to combat money laundering and terror financing. The group’s recommendations work to bring forth the necessary changes required in countries, whose implementation is judged on "mutual evaluations" from other member states.

On the basis of these recommendations and countries’ compliance to them, the group has maintained two lists since the 2000s. The first list, ‘Call for action,’ also called the FATF Black List, features countries that the group has considered non-cooperative in the global fight against money laundering and terrorist financing. Currently, this list only contains North Korea and Iran.

The ‘grey list’ or the ‘Other monitored jurisdictions’ list, on the other hand, features countries where the FATF trains a bigger lens on the financial goings-on of a country to ensure they are meeting the recommendation criteria set out by the organisation.

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“Jurisdictions under increased monitoring are actively working with the FATF to address strategic deficiencies in their regimes to counter money laundering, terrorist financing, and proliferation financing. When the 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. This list is often externally referred to as the grey list,’ the organisation stated.

Turkey in trouble

Being put on the ‘grey list’ has significant repercussions for the country, with many experts calling the stigma and scrutiny of being placed on the list as major factors for countries to quickly adopt recommended guidelines. For Turkey, which is joined by Jordan and Mali on the list, its inclusion means that investors and creditors are less likely to put their money into the country. Pakistan is also on the list.

Exports, output and consumption suffer domestically and the fiscal position for the country is also weakened as global banks are reluctant to conduct more business in the country. The international pressure also comes in the form of withheld international aid and lowered confidence in the macroeconomic policies of a nation.

With Turkey already in the grip of an economic crisis that has seen the Turkish lira rapidly lose value against the US dollar, the lack of foreign investment and lower foreign reserves do not bode well for the country.

(Edited by : Shoma Bhattacharjee)