The FATF maintains a list of jurisdictions subject to increased monitoring, known colloquially as the “grey list”.
Gibraltar has taken a number of steps to strengthen the effectiveness of its anti-money laundering and counter terrorist financing (AML/CTF) regime since being placed on the list in the FATF’s June 2022 plenary, the same meeting that saw Malta removed from the same list.
Following Gibraltar’s placing on the list, the FATF created an action plan for the territory with a May 2023 deadline for completion.
The body said at the time that Gibraltar’s status as a major gambling hub was a significant factor in its decision. In particular the FATF criticised the government’s failure in “applying sufficient fines for anti-money laundering failings”.
FATF notes Gibraltar progress
The FATF noted the British Overseas Territory’s progress in this regard, which has included the dialling up of enforcement action by imposing financial penalties as well as the publication of cases. However, the body noted that one year after being placed on the list all deadlines have now passed.
As such, the FATF encouraged Gibraltar to continue to implement its action plan to address its ongoing strategic deficiencies “as soon as possible”.
“Gibraltar should continue to work on implementing its action plan to address its strategic deficiencies, including by showing that it is able to pursue more final confiscation judgments commensurate with the risk and context of Gibraltar,” said the body.
The update on the status of Malta’s progress to address its AML/CTF vulnerabilities took place on Friday at the conclusion of the third Plenary of the FATF under the leadership of T Raja Kumar.
Gibraltar responds to FATF
Following the outcome of the FATF plenary, the Gibraltar government responded to the news that the territory would remain on the list. It emphasised that only one point remained requiring action and reaffirmed its commitment to the process.
“HM Government of Gibraltar notes the update on our jurisdiction that was published by the FATF on 23 June,” said the government.
“Noting that only one substantive action point remains pending, the government continues to work tirelessly to meet its action plan at the very earliest opportunity.
“The government is totally committed to this process and all supervisory and other authorities continue to work with FATF to demonstrate our compliance with our action plan.”
In the FATF’s February plenary the body took note of Gibraltar’s political commitment to work with the intergovernmental organisation. Again on that occasion, it made clear there had been progress, the lack of action on confiscation orders meant that the territory would not be removed from the list.
Consequences of being on grey list
Gibraltar’s continued presence on the grey list will have consequences for businesses active in Gibraltar, most pertinently the jurisdiction’s large gaming sector. Companies in Gibraltar will face increased regulatory scrutiny from domestic and international bodies – meaning increased compliance costs.
Another effect of being on the list is an increased difficulty in accessing financial and banking services, as some organisations will be hesitant to make transactions with businesses located in a grey list country. As a result it is harder to open a bank account, receive credit lines or any other kind of financial service.
Criticism by opposition
The failure of the FATF to remove Gibraltar from the list led to criticism by the territory’s opposition party, the centre-right Gibraltar Social Democrats (GSD).
The party called the government’s response to the FATF “underwhelming” in its lack of detail as to the roadmap to achieve delisting.
GSD shadow minister for financial services and gaming, Roy Clinton, criticised the sitting minister for what he characterised as misplaced optimism.
“The minister for financial services, Albert Isola, continues to express optimism that Gibraltar will achieve delisting but he must accept that there is a growing sense of frustration at the failure to deliver on that optimism,” he said.
“Indeed in June 2022 the government had stated it would show compliance ‘within the timescale given’, that time has now expired.
“The minister will be aware that our financial services industry is suffering at the ignominy of being listed between Congo and Haiti as a high risk jurisdiction.”
Given expiration of the FATF deadline, Clinton called on the minister to make a statement in parliament as to what “practical and urgent steps” are being taken to satisfy the AML body.
“They really should know better”
Following the GSD’s intervention, the government hit back at the party for playing politics. In an official release the government said that the opposition had “succumbed to the temptation of politicising the crucial ongoing efforts to remove Gibraltar from the FATF grey list”.
“Roy Clinton’s statement smacks of political opportunism,” said the minister that Clinton had criticised, Albert Isola. “While the opposition seeks to undermine our efforts, the government remains resolute in achieving delisting and restoring our jurisdiction’s reputation.
“It is regrettable that the opposition has abandoned their previous responsible approach for a misconceived political advantage. They really should know better.
“Notwithstanding the GSD opposition’s change in approach, I continue to extend an invitation to the opposition to meet them and brief them privately.
“I will never tire of thanking our regulators and law enforcement agencies for their professionalism in addressing the FATF requirements and have every confidence we will achieve delisting very soon.”
Gibraltar is not the first international gambling hub to have been placed on the FATF list. In June 2021, the monitoring body saw fit to place the island nation of Malta on the list due to “strategic deficiencies” in its AML/CTF regime.
After the task force placed Malta on the list, it presented the country with a three-pronged “action plan” to solve its outstanding issues.
These involved demonstrating that ownership information was correct, clarifying the role of the island’s Financial Intelligence Unit (FIU) and increase the FIU’s focus on money laundering and tax evasion.
By February 2022, the FATF said that Malta had “substantially completed its action plan”, by implementing a number of reforms prior to being struck off the list four months later.