Nigel's Eyes

20221023 The FATF's Blacklist never really went away. It's being expanded.

While global media attention was paid to the removal of Pakistan from the FATF's Grey List, there is scant attention paid to the removal of Nicaragua.

Similarly, there is little attention paid to the FATF's decision with regard to Myanmar. That's a mistake.

The list of countries subject to increased monitoring, the so-called "grey list" is here:… . Myanmar isn't on it.

Instead, it appears on a list that is, essentially, a sanctions list. For those that remember that the FATF said it was to abolish its blacklist (when the last country, which happened to be Myanmar) was removed from it more than a decade ago, the list looks very much like a blacklist and that is what most media is calling it.

Myanmar sits with North Korea and Iran, the USA's old Axis of Evil minus Iraq. The USA was not happy when Myanmar was taken off the FATF's list and kept it on a list of its own. But as Myanmar opened up, the USA decided to manipulate the system, seeing commercial opportunities. It said that US companies (and only US companies) could do business in and with Myanmar. But the sanctions remained in place meaning that non-US businesses could not do the same business, if they had any US dollar business anywhere in the world unless they took the risk of OFAC action.

In recent years, as a result of a wide range of political malfeasance, countries have imposed a range of sanctions against Myanmar, which the USA continues to call Burma, and various members of its government.

The FATF says that Myanmar has been listed because its action plan to address its strategic deficiencies is overdue despite a final warning being issued. The FATF says it will "urge all jurisdictions to apply enhanced due diligence to business relations and transactions with Myanmar."

That raises a can of worms: it's not actually sanctions. It's not targeted - in fact if we apply the ordinary and natural meaning of the words, it applies to the country (and maybe the government) not to individuals or companies. There is no doubt that the wider interpretation will be adopted.

But as the USA well knows, much of the expropriation of funds from Myanmar by officials has long been by the physical shipping of precious stones, often in diplomatic bags. Tourist dollars are also carried out by similar means although those have been in short supply in the past couple of years.

Requiring foreign banks to perform detailed KYC on the source of funds received from Myanmar will inevitably lead to "de-risking" because of the uncertainty of results and the and cost of getting them.

The real question is whether anything material has changed (no, it hasn't: the dismal human rights record, the hi-jacking of government and the destruction of democracy have been the same for several years).

Why now? Well, that depends on whether one sees the demands of the FATF for an action plan backed by threats is legitimate. That's a debate for a different day. Perhaps a further extension might have been granted. Probably not: Myanmar has isolated itself in ways that are, actually, far more serious than irritating the FATF - it's alienated almost all ASEAN governments, most of which are barely speaking to it.

The reality is that Myanmar has put itself into a position where it has unified pretty much everyone against it.

But there is an addiitional dimension: that of drugs: as part of the Golden Triangle there is huge opportuinity to be a feeder for the trade in cannabis in Thailand.

And then there's the people trafficking: people are flooding out of the country looking for work. One Myanmar national I spoke to told me that he's an ethnic Chin, one of the groups that founded the country. But due to his ethnicity, he is unable to find work. So he, clearly educated, is wiping down tables in a coffee shop in a semi-industrial area of Kuala Lumpur. He's one of the lucky ones that Malaysia has allowed to work. But the unlucky ones fall into the hands of bandits masquarading as employment agents. Some end up in slave-like conditions in fishing boats off the coast of Indonesia, particularly Aceh. Others end up in mass graves such as those found in northern Malaysia. Some end up in organised begging rings where a baby factory makes sure that women always have a small infant in a sling as they walk through outdoor restaurants with a card, in English, setting out a sob story. One soon learns to be sceptical when the same woman has a constant supply of new babies.

But the money for these trades is rarely generated in Myanmar and therefore is not in the Myanmar banking system nor used in international trade by Myanmar nationals.

On every basis possible, something needs to be done about the state of affairs.

But it's difficult to see how putting additional burdens on financial institutions and others will make any material difference.

Which brings us back to a disturbing question: is the Black List a political power play rather than a meaningful step?