[co-authors: Claire Le Tollec and Alexandra Bustamante]*
On October 21, 2022, the Financial Action Task Force (FATF) officially moved Myanmar onto the agency’s blacklist, where it joins Iran and North Korea, the only other two listed countries. It is likely that the United States and other countries will take the FATF designation as grounds to impose financial sanctions on the country, likely focusing on its central bank and financial institutions.
On Friday, October 21, at 5:00 pm CEST, the FATF President, T. Raja Kumar, indicated that Myanmar is now on its list of High-Risk Jurisdictions subject to a Call for Action (known colloquially as the FATF’s “blacklist”). President Kumar noted stated that FATF Members should implement “enhanced due diligence” to business relations and transactions in relation to Myanmar. The FATF President specified that this enhanced due diligence should not negatively impact humanitarian assistance. He asked that countries make sure that no blanket measures should disrupt the flow of humanitarian funds or “harm fundings for legitimate and pure activities.” However, President Kumar did not give specifics on what would considered as “legitimate and pure activities.”
The FATF is the global money laundering and terrorist financing watchdog that sets international standards to promote the integrity of the international financing system. The Task Force is known for maintaining its blacklist, as well as and “greylist” of Jurisdictions under Increased Monitoring—countries considered to be uncooperative in international efforts against money laundering and or terrorism financing.
The FATF’s recommendations are not binding per se, however, member states are expected to comply with its recommendations and implement legally binding measures such as economic sanctions against blacklisted countries.
By moving Myanmar from the greylist onto the blacklist, the FATF may have raised (or perhaps lowered) Myanmar to the same level of financial ostracism Iran and North Korea (the only two other countries on the Task Force’s blacklist)
Countermeasures recommended by the FATF against countries in the blacklist include:
- “Limiting business relationships or financial transactions with the identified country or persons in that country”
- “Requiring financial institutions to review and amend, or if necessary terminate, correspondent relationships with financial institutions in the country concerned”
Potential U.S. Response
However, in light of the level of sanctions imposed on the other two blacklisted countries, it appears likely that the United States will be drafting substantial financial sanctions to follow the FATF recommendation. That package of sanctions could include the designation of the Myanmar central bank, or other key banks in the country, as Specially Designated Nationals, effectively cutting those institutions off from the U.S. financial system.
However, it is very likely that any U.S. sanctions package will contain a humanitarian exemption, likely allowing food, medicine, and other humanitarian aid to flow to the country, as well as allowing the related transactions required to maintain that flow.
Potential EU Response
An EU directive will implement the revised FATF recommendations within the EU and must be adopted by member states in their national law. However, given the usual nature of EU sanctions, it appears likely that, when the EU imposes sanctions, the applicability and scope of those restrictions will be much more limited than those of the United States. Typically, the EU does not impose secondary sanctions or sanctions with substantial extraterritorial effect.
We will continue to update the situation here as countries prepare and announce their sanctions packages in response to the FATF announcement.
*Claire Le Tollec is a legal consultant in the Governmental Practice Group in the firm's Brussels office and ALexandra Bustamante is a law clerk in the firm's Washington, D.C. office.
