Observatory of Political and Economic Networks

Syria and the FATF Gray List: Barriers to Financial Reintegration and Pathways Forward

Vittorio Maresca di Serracapriola and Karam Shaar

Summary

The Financial Action Task Force (FATF) sets global standards for anti-money laundering (AML), counter-financing of terrorism (CFT), and counter-proliferation financing. Independent experts conduct mutual evaluations to assess a country’s compliance with FATF standards. Based on their findings, a country either remains on the “white list” (low-risk because of adequate compliance), or is placed on the “gray list” (requiring reforms under increased monitoring) or the “black list” (high-risk jurisdictions facing severe financial isolation). Gray-listing and blacklisting trigger de-risking, as FATF members pressure their domestic banks to apply stricter due diligence when dealing with financial institutions from flagged countries. Syria has been on the gray list since 2010 due to AML/CFT deficiencies. By 2014, FATF acknowledged Syria’s significant reforms in AML/CFT measures but could not conduct an on-site evaluation, citing security concerns. Without this step, Syria remains on the gray list. Gray-listing worsens financial isolation, though moving to the white list alone would not fully restore Syria’s banking functionality. To exit the gray list, Syria’s interim government must engage with FATF, strengthen AML/CFT measures, and facilitate the long-delayed on-site visit.

Introduction

Syria faces a daunting set of challenges—rebuilding after 13 years of war, managing bankrupt state institutions, stabilizing a collapsed economy, and navigating economic sanctions. On top of these difficulties, it remains on the Financial Action Task Force’s (FATF) “gray list,” which flags countries working to address strategic deficiencies in their systems for combating money laundering, terrorist financing, and the financing of weapons of mass destruction (WMDs).

As discussions on sanctions relief gain momentum, the EU has lifted several sanctions on Syria, including those on banking, energy, transport, and reconstruction. Policymakers, however, should not assume that lifting sanctions alone will trigger a market-driven economic revival.

Years of de-risking and financial decoupling have pushed the international financial sector away from Syria, making a return to pre-sanctions or pre-war conditions unlikely without additional actions and incentives. While Western sanctions and the civil war had already driven financial institutions to sever correspondent relationships with Syrian lenders,—leading Western banks to sever correspondent ties with Syrian lenders—FATF gray-listing has added another layer of financial isolation.

Even if sanctions are lifted, Syria’s continued presence on the gray list will keep compliance costs high, discourage foreign investment, and limit the country’s ability to reintegrate into global markets. Addressing FATF’s concerns is not just about meeting regulatory standards; it is an essential step for Syria’s economic recovery and reintegration into the international financial system.

Since FATF placed Syria on the gray list in February 2010, the country had made significant progress in strengthening its AML/CTF framework, leading FATF to conclude by 2014 that it had completed its action plan. Citing “security concerns,” however, FATF has yet to conduct an on-site visit to verify whether Syria has fully implemented and sustained these reforms. Now, with the Assad regime ousted, Syria and the FATF must reassess the gray-listing status and move toward a definitive resolution.

The FATF’s Mandate

The Financial Action Task Force (FATF), established in 1989 by the G7, is an intergovernmental body that develops and promotes policies to protect the global financial system against money laundering and terrorist financing. Originally launched as an eleven-member task force with a one-year mandate to curb illicit funds from the narcotics trade, FATF has since expanded its focus to include transnational crime, terrorism financing, and the proliferation of weapons of mass destruction (WMDs).

FATF has issued forty recommendations outlining how states should combat money laundering, terrorism financing, and WMD proliferation through legal and regulatory action. To enforce its recommendations, FATF conducts peer reviews known as “mutual evaluations” to assess and monitor member compliance.

FATF, along with nine “FATF-style” regional bodies (FSRBs), and occasionally the International Monetary Fund (IMF) or World Bank, carry out these evaluations. Assessment teams, composed of legal, law enforcement, and financial experts, conduct two to three on-site visits and rate a country’s legal and regulatory framework as compliant (C), largely compliant (LC), partially compliant (PC), or non-compliant (NC). The evaluation process can take more than a year.

Mutual evaluation reports measure a country’s technical compliance, implementation, and effectiveness in combating money laundering and terrorism financing while providing focused recommendations to further strengthen the country’s system. The country’s assessors present the draft report to the FATF Plenary at one of the three meetings it holds every year, in February, June, and October. Consensus among members (except for the assessed country, which has no vote) is required to overrule any of the draft findings and ratings by the assessors.

FATF promotes the full and effective implementation of its forty recommendations worldwide through a global network of FSRBs and international organizations. These recommendations provide a framework for national legislation, offering broad, adaptable guidelines rather than rigid legal mandates.

To ensure consistency in applying its standards, FATF provides training and outreach initiatives to strengthen the capacity of FSRBs in assessing and monitoring their member countries. One such regional body is the Middle East and North Africa Financial Action Task Force (MENAFATF).

FATF also addresses emerging threats to financial integrity by aligning its efforts with international priorities set by bodies such as the United Nations Security Council (UNSC) and the G20. It prepares guidance to help jurisdictions implement international obligations while ensuring compliance with FATF standards. FATF also assists jurisdictions in applying the financial provisions of UNSC resolutions on terrorism and non-proliferation, assessing both their implementation and effectiveness through the mutual evaluation process.

FATF comprises forty full members, including the European Commission and the Gulf Cooperation Council (GCC), and nine regional bodies that serve as associate members. The institution also collaborates with twenty-eight observer organizations, such as the IMF, the United Nations, the World Bank, and the Organization for Economic Cooperation and Development (OECD).

Although FATF may appear to function as a large international bureaucracy, it operates more accurately as a transnational public policy network. Its members, aside from the European Commission and the GCC, represent a diverse cross-section of states. National delegations typically include officials from various domestic agencies, ranging from treasury officials to law enforcement personnel. FATF also collaborates with private-sector representatives, including bankers, lawyers, accountants, and non-profit organizations.

Monitoring Mechanisms

FATF’s decision-making body, the FATF Plenary, meets three times per year, with at least one session held in Paris, where its Secretariat is based alongside the OECD. Despite its proximity, FATF remains independent of the OECD.

During plenary sessions, FATF holds countries accountable for noncompliance. If a country repeatedly fails to implement the FATF Recommendations, it can be classified as a “Jurisdiction under Increased Monitoring” or a “High Risk Jurisdiction." These classifications are commonly known as the “gray” and “black” lists, respectively.

FATF employs two primary monitoring mechanisms: mutual evaluation and typology reports. The mutual evaluation procedure applies to all jurisdictions seeking compliance with FATF standards. A team of FATF experts, alongside representatives from international organizations, conducts on-site visits to assess compliance with FATF’s forty recommendations. The plenary session then reviews the results. Countries that perform poorly face closer monitoring and must report with greater diligence on their progress. Typologies reports serve both diagnostic and analytical purposes. These reports bring together money laundering experts to discuss trends, share case studies, and assess the effectiveness of countermeasures.

A key component of FATF’s monitoring system is the International Co-operation Review Group (ICRG), which identifies and reviews jurisdictions with significant deficiencies in their anti-money laundering (AML) and counter-terrorist financing (CTF) frameworks. Established to ensure corrective action in high-risk jurisdictions, the ICRG evaluates countries based on their risks related to money laundering, terrorism financing, or WMD proliferation financing. In 2009, the G20 urged FATF to strengthen ICRG procedures and publicly name countries with deficient AML/CTF systems.

There are several ways a country can become subject to review by the ICRG:

It does not allow timely publication of the mutual evaluation report or does not participate in as a member in the FATF’s Global Network
The result of its assessment shows a significant number of key deficiencies
It is nominated for the ICRG review by one or more other countries for specified and substantiated reasons.

A country that enters the ICRG review process as a result of poor performance on its mutual evaluation has one year to address its key deficiencies to avoid listing. If deficiencies are not sufficiently addressed, the FATF works with the country to develop an action plan. Once the plan is adopted by the FATF and committed to by the country, the FATF places the country on the gray list. If no action plan is agreed with the FATF or high-level political commitment is not given, the FATF places the country on the black list.

The FATF’s decisions or the plenary meetings’ outcomes involve a complex case-by-case assessment and do not follow a rigid timetable. Countries can contest their mutual evaluation ratings, and FATF may extend deadlines for corrective actions, further prolonging the gray-listing process.

Currently, twenty-four countries remain under ICRG review, including Syria. The blacklist includes only jurisdictions that refuse to commit to reform—North Korea, Iran, and Myanmar. As of February 2025, FATF has reviewed 139 jurisdictions, publicly identifying 114. Among them, 86 have since implemented necessary reforms and were removed from the monitoring process.

To exit FATF’s increased monitoring, a jurisdiction must address nearly all elements of its action plan. FATF then conducts an on-site visit to verify reforms and assess the country’s political commitment to maintaining compliance. If successful, FATF removes the jurisdiction from public identification at the next plenary session and places it on the white list.

Syria and the Gray List

In November 2006, FATF published Syria’s mutual evaluation report, which analysed the country’s AML/CTF measures and identified urgent areas for reform. Although the evaluation team interviewed officials from Syrian government agencies and the private sector, the report primarily assessed Syria’s legal framework rather than how effectively authorities enforced it.

The report offered a detailed account of Syria’s efforts to comply with FATF recommendations while raising serious concerns on the country’s AML/CTF framework. The evaluation team expressed its worry that terrorism financiers and money launderers might be able to exploit gaps in Syria’s financial and banking regulations. The report also noted that some Syrian officials underestimated these risks. The MENAFATF criticized Syria’s inability to freeze terrorist assets effectively, its weak system for reporting suspicious financial transactions, and its deficient recordkeeping practices. The report also cited a March 2006 enforcement action by the US Treasury Department against the Commercial Bank of Syria, classifying the bank as a “primary money-laundering concern” and linking it to terrorism financing.

In the mutual evaluation report, Syria received a “partially compliant” (PC) or “non-compliant” (NC) rating on 34 recommendations (Table 1). Since 2007, FATF has subjected countries to ICRG review if they receive a PC or NC rating on at least three of the “big six” recommendations—Syria failed five of the six, meeting the threshold for review¹. As a result, FATF placed Syria under ICRG review.

According to the 2009 Enterprise Surveys, corruption was among the top three obstacles to investment in Syria. More than 80% of firms reported that they were expected to offer bribes to public officials to “get things done,” compared to a regional average of 37%. Similarly, between 2006–2009, the Heritage Index of Economic Freedom ranked Syria fourth-lowest in the region in terms of rule of law. The index described Syrian government institutions as lacking public accountability, plagued by corruption, and operating under a judiciary that was neither transparent nor independent.

Table 1: Syria’s Implementation of the FATF 40 Recommendations²

FATF placed Syria on the gray list in February 2010, publicly warning that its jurisdiction posed financial risks. In response, Syria made a high-level political commitment to strengthen its AML/CTF framework. FATF identified five priority areas for Syria:

Adopting adequate measures to implement and enforce the 1999 International Convention for the Suppression of Financing of Terrorism (Special Recommendation I)
Adequately criminalizing terrorist financing (Special Recommendation II)
Implementing adequate procedures for identifying and freezing terrorist assets (Special Recommendation III)
Ensuring financial institutions are aware of and comply with their obligations to file suspicious transaction reports in relation to money laundering and terrorism financing (Recommendation 13 and Special Recommendation IV)
Adopting appropriate laws and procedures to provide mutual legal assistance (Recommendations 36-38, Special Recommendation V).

The Progress Syria Has Made Since

By 2014, Syria had made significant progress in improving its AML/CTF framework since its gray-listing by the FATF in February 2010. While it may seem surprising that the Assad regime invested substantial effort in meeting FATF recommendations, the organization acknowledged in June 2014 that Syria had addressed key technical aspects of its action plan, including criminalizing terrorism financing and establishing procedures for freezing terrorist assets. Due to security concerns, however, FATF has not yet conducted an on-site visit to verify whether Syria has effectively implemented and sustained these reforms. As a result, Syria remains on the “gray list.”

The latest available follow-up report for Syria, issued by the MENAFATF in May 2018 after a three-year gap where no report on Syria was issued, highlighted a major area of reform: aligning Syria’s national legislation with international CTF standards. To comply with FATF’s Special Recommendation I, Syria amended Legislative Decree 33 (2005)—the foundation of its AML/CTF system—by introducing Legislative Decree 27 (2011) and Legislative Decree 46 (2013). These changes allowed Syria to meet its obligations under the International Convention for the Suppression of the Financing of Terrorism (ICSFT), which requires states to freeze and seize terrorist assets, and promotes international cooperation in investigating and prosecuting terrorism-related financial crimes.

Syria also strengthened laws criminalizing terrorism financing, as required by Special Recommendation II. Amendments to Legislative Decree 33 (2005) aligned national law with ICFST, making it a crime to provide or collect funds for terrorist acts, organizations, or individuals—even if no direct connection to a specific attack could be established, an aspect previously overlooked in Syrian legislation. Legislative Decree 46 (2013) further reinforced Legislative Decree 33 (2005) and Legislative Decree 27 (2011) by classifying terrorism financing as a “predicate offense” for money laundering, meaning that funding terrorism is now legally treated as a serious crime that can trigger money-laundering charges. Syrian authorities claim that domestic courts have issued multiple convictions under these provisions, though details on enforcement remain scarce.

The Syrian government also worked to strengthen asset-freezing and confiscation measures in compliance with Special Recommendation III. A national committee was established to oversee the enforcement of UNSCR 1267 and 1373, ensuring that assets linked to individuals and entities designated by the UN ISIL (Da’esh) and Al-Qaeda Sanctions Committee were frozen. In March 2014, the Prime Minister issued Decision 851, creating the “Committee for Freezing Specified Entities and Persons’ Funds.” This body became responsible for implementing asset freezes and distributing international sanctions lists to financial institutions. These institutions must freeze assets immediately upon notification, without prior warning to affected individuals or organizations.

Syria also tightened regulations on suspicious transaction reporting, moving closer to compliance with Recommendation 13 and Special Recommendation IV. Legislative Decree 27 (2011) required financial institutions to report any transactions suspected of involving money laundering or terrorism financing—including attempted transactions—to the AML/CTF Authority. Article 9 of Legislative Decree 33 (2005), along with subsequent amendments and executive instructions, reinforced these reporting obligations, ensuring greater scrutiny of financial transactions linked to illicit activities.

Legal reforms also improved Syria’s framework for mutual legal assistance (MLA), addressing FATF’s Recommendations 36–38 and Special Recommendation V. Amendments to Legislative Decree 33 (2005) through Legislative Decree 27 (2011) empowered Syrian judicial authorities to collaborate with foreign counterparts on legal assistance, extraditions, asset tracing, and the confiscation of illicit funds. Courts were granted the power to recognize and enforce foreign judicial rulings related to money laundering and terrorism financing. A State Council ruling further clarified that legal professional confidentiality does not exempt lawyers from reporting terrorism financing, removing a key obstacle to international cooperation.

Additionally, the government expanded the list of predicate offenses under Article 1(c) of Legislative Decree 33 (2005) to include terrorism financing, the illegal trafficking of stolen goods, environmental crimes, murder, serious bodily harm, market manipulation, and monopolistic practices. These changes provided Syrian authorities with a stronger basis to assist foreign governments in tracing, freezing, and confiscating funds linked to money laundering and terrorism financing.

Despite these legal improvements, Syria’s increasing shift toward a cash-based economy has likely undermined AML controls. In most countries, cash plays a major role in money laundering and terrorist financing due to its untraceable nature. Since cash is hard to trace, it is also difficult to measure routinely. And because cash payments are not usually recorded, there are no direct proxies of how (for which purpose, how often, in which form) it is used by individuals and businesses.

Officially, Syria remains on the gray list due to the lack of an FATF on-site visit to verify whether Syria has effectively implemented and sustained these reforms. Without verification of whether these reforms are consistently applied in practice, the international community cannot fully confirm their effectiveness. Until such an assessment takes place, Syria’s progress remains incomplete.

Why Did the Assad Regime Comply with FATF?

According to an interview with Nassib Ghobril, Chief Economist at the Lebanese Byblos Bank Group, one possible explanation for the regime’s push to align with FATF recommendations lies in its broader effort to present Syria as a reform-oriented country and attract Arab and foreign investment. This initiative began in the mid-2000s when the government allowed private banks to operate in Syria for the first time in 40 years, along with insurance companies.

In 2010, Syrian authorities also commissioned a sovereign rating from Standard & Poor’s—the first rating Syria had ever received from any of the three major international rating agencies. Sovereign ratings provide a comprehensive assessment of a state’s credit profile and solvency. However, Syria never made the rating public. The regime’s FATF compliance efforts likely fit within this broader attempt to signal financial openness.

Another explanation for the regime’s engagement with the FATF’s corrective process lies in its strategic use of AML/CTF measures to control political opponents and address security threats. According to Paul Cochrane, a financial crime expert and writer for the Money Laundering Bulletin, the aspect where Syria took financial crime more seriously in the years following its gray-listing was in terrorist financing. This priority likely stemmed from the threat posed by banned militias and groups such as Al-Qaeda and Da’esh. Indeed, according to diplomatic sources, the Assad government itself requested that the UN Security Council ISIL and Al-Qaeda Sanctions Committee add al-Nusra Front (now Hay’at Tahrir al-Sham or HTS) to the UNSC 1267 sanctions list.

Egypt employed similar tactics. The Egyptian Money Laundering and Terrorist Financing Combating Unit (EMLCU), Egypt’s Financial Intelligence Unit (FIU), is headed by Ahmed Saeed Hussain Khalil, the brother of Egyptian President Abdel Fattah al-Sisi. Ahmed Khalil is also the former president of MENAFATF (2020–21). This suggests that AML/CTF compliance is key to security and political stability.

Controlling political opponents did not necessarily mean blocking their financial operations, but simply monitoring them. The Assad regime effectively facilitated ISIL financing by allowing Syrian banks to continue operating within ISIL-held territory with outdated CTF regulation. A February 2015 FATF report found that more than 20 Syrian financial institutions maintained operations in ISIL-controlled areas. Many of these branches remained connected to their headquarters in Damascus and, in some cases, retained links to the international financial system.

The conflict and weaker enforcement of domestic regulations in some areas have likely reversed many of Syria’s efforts toward tackling its AML and CTF strategic deficiencies. The FATF report also outlined ISIL’s methods and channels to raise funding with Syria, including from the proceeds of criminal activities, the illegal exploitation of oil and petroleum products, extortion activities, and bank robberies.

Even after international watchdogs exposed illicit terror-financing channels, the Syrian government turned a blind eye. For example, in April, September and November 2019, the US Treasury Department designated a series of ISIL financial facilitators and money service businesses that had been enabling ISIL activities in Syria and beyond.

Despite these public designations, the Syrian government took no action against them. These financial networks included ISIL “general financial manager” Abd-al-Rahman Ali Husayn al-Ahmad al-Rawi, who according to the US Treasury Department press release announcing his designation in April 2019, “was one of a few individuals who provided ISIL significant financial facilitation into and out of Syria."

The Impact of Gray-Listing

FATF gray-listing can severely impact a country’s economy, particularly for low-income nations that rely on foreign investment and aid. As FATF urges countries to apply enhanced due diligence, transaction costs rise, prompting investors to scale back operations or sever ties altogether.

For Syria, gray-listing coincided roughly with the imposition of Western sanctions and the outbreak of the civil war, making it difficult to isolate their respective economic effects. The economy had only begun liberalising in the early 2000s, so foreign financial flows remained relatively small even before FATF added Syria to the gray list in February 2010 and before the uprisings began in March 2011.

Private banks had entered the country after 2004, but the state remained a dominant economic player, with central and state-owned banks accounting for three-quarters of banking assets. When hostilities broke out in 2011, private banks held around 11 billion USD in deposits, while the entire banking sector accounted for 29.8 billion USD, according to Central Bank of Syria (CBS) figures. By comparison, neighboring Lebanon’s banks held 131 billion USD in deposits at the time.

One of the earliest financial developments after Syria’s gray-listing was capital flight. FATF placed Syria on the gray list in February 2010, and by March 2011 significant account withdrawals followed as the uprisings began. Depositors withdrew an estimated 2.5 billion USD from Syrian banks in the first year of the conflict. As hostilities dragged on, more money flowed out, with Lebanese media reporting that much of it ended up in Russia.

According to Abdul Hafiz Mansour, then-secretary of Lebanon’s Special Investigation Commission (SIC)—Lebanon’s Financial Intelligence Unit (FIU)—Syria’s wealthiest individuals had already secured accounts in Europe. The capital flight primarily involved smaller business owners and middle-class Syrians, who relied on physical cash movements rather than offshore accounts.

A 2021 IMF study found that gray-listed countries frequently experience capital flow disruptions. De-risking pressures push banks to exit relationships with customers in high-risk jurisdictions, while correspondent banks sever ties due to rising compliance costs. This trend was particularly visible in the sharp decline of foreign bank exposures to Syrian banks after 2011. According to the study, investors often use gray-listing as a risk indicator, prompting them to shift resources elsewhere to minimize exposure. Despite capital outflows, Syria’s stock exchange in Damascus has continued to stay open throughout the conflict, with a small number of investors continuing to trade on a regular basis.

Gray-listing also disrupts cross-border transactions. A SWIFT data analysis (2004–2014) found that gray-listed countries face up to a 10% decline in cross-border payments received from other jurisdictions. Uncertainty spikes in the early stages of gray-listing, as foreign investors evaluate how domestic firms will adapt and how financial markets will react.

In international bond and loan markets, gray-listing raises risk perceptions, putting upward pressure on both government borrowing levels and corporate spreads. Some creditors may halt lending altogether, while others may reduce their investment levels. Governments and international lending organizations may react in a similar fashion, including by increasing the conditionality (and thus expense) of lending, resulting in less liquidity for the country.

The growing dependence on bilateral financial support, in particular from Iran, along with the significant exchange rate depreciation and the collapse in GDP, likely pushed external debt from 9% of GDP in 2009 to nearly 80% at the end of 2015. By making Syria an even higher-risk jurisdiction in the eyes of foreign creditors and investors, gray-listing compounded the effects of Western sanctions and war, reinforcing the country’s reliance on internal and politically aligned external financing.

Practical Steps for Gray List Removal

Syria’s interim government has an opportunity to re-establish ties with FATF and align its financial governance with international AML/CTF standards. As economic sanctions ease, getting off the gray list must become a priority for Syria’s financial reintegration and economic recovery.

To ensure a constructive re-engagement, the new government, alongside the Central Bank of Syria and other domestic regulators, should formally commit to FATF’s forty recommendations and request a structured engagement process. This requires reaching out to MENAFATF for technical assistance, actively incorporating external feedback, and rebuilding cooperation on AML/CTF issues.

Diplomatic backing is crucial for exiting the gray list. The interim government should seek support from MENAFATF member states and Western nations with strong influence in FATF. By demonstrating a serious commitment to AML/CTF reforms, Syria can secure both political and technical assistance to implement necessary changes.

Since FATF has not conducted a mutual evaluation of Syria in over a decade, the government should formally request an on-site assessment to measure its AML/CTF progress. The first step is for FATF to dispatch a long-postponed peer review team for an evaluation. After the visit, the interim government must collaborate closely with FATF and other technical advisors to develop a compliance roadmap with clear implementation timelines.

Since assuming power, the interim government has shown a commitment to combat smuggling and illicit trade, particularly Captagon trafficking. To sustain this momentum, Syria must continue strengthening enforcement measures against smuggling networks and illicit goods trafficking.

The Central Bank of Syria, still under US sanctions and partial EU sanctions—with asset freezes in place but exemptions allowing economic resource transfers in many cases—must acquire the necessary screening software to process Suspicious Activity Reports (SARs) and ensure its Financial Intelligence Unit (FIU) operates in line with international standards. These screening tools enable the FIU to analyze SARs submitted by banks, allowing law enforcement to track illicit financial flows, secure convictions, and confiscate criminal assets.

However, because most of these compliance technologies originate from the EU and the US, Syria faces trade restrictions and economic sanctions that limit access. The interim government must identify alternative solutions or negotiate exemptions to obtain these critical tools.

In 2023, Egmont Group’s 177 FIUs received over 600 million reports, highlighting the staggering volume of data financial intelligence units must process. At the Parliamentary Intelligence-Security Forum in Washington DC (December 2024), Jerome Beaumont, executive secretary of the Egmont Group, noted that all FIUs globally employ fewer than 4,500 full-time staff—less than the compliance headcount of a single major financial institution.

This raises concerns that even if Syria increases its AML/CTF spending, weak institutional capacity may limit the effectiveness of its reforms. To avoid this, Syria must focus not only on compliance spending but also on institutional efficiency, workforce training, and international collaboration.

References:
¹ Recommendation 3, Recommendation 5, Recommendation 6, Recommendation 10, Recommendation 11, and Recommendation 20.

² See Annex.

³ DNFBP: Designated Non-Financial Businesses and Professions, a category defined by the Financial Action Task Force (FATF) that includes entities such as lawyers, real estate agents, and casinos subject to anti-money laundering regulations.

Annex: Syria’s Implementation of the FATF’s 40 Recommendations

Core Recommendations rated “Partially Compliant” or “Non-Compliant”

R1 (Money laundering offence): Countries should criminalise money laundering on the basis of the Vienna Convention and the Palermo Convention. Countries should apply the crime of money laundering to all serious offences, with a view to including the widest range of predicate offences.

R5 (Customer due diligence [or CDD]): Financial institutions should be prohibited from keeping anonymous accounts or accounts in obviously fictitious names. The principle that financial institutions should conduct CDD should be set out in law. Each country may determine how it imposes specific CDD obligations, either through law or enforceable means. Financial institutions should (a) identify the customer and verify that customer’s identity using reliable, independent source documents, data or information; (b) identify the beneficial owner; (c) obtain information on the purpose and intended nature of the business relationship; (d) conduct ongoing due diligence on the business relationship and scrutiny of transactions undertaken throughout the course of that relationship to ensure the institution’s knowledge of the customer, their business and risk profile, including, where necessary, the source of funds.

R13 (Reporting of suspicious transactions): If a financial institution suspects or has reasonable grounds to suspect that funds are the proceeds of a criminal activity, or are related to terrorist financing, it should be required, by law, to report promptly its suspicions to the financial intelligence unit (FIU).

SR2 (Terrorist financing offence): Countries should criminalise terrorist financing on the basis of the Terrorist Financing Convention, and should criminalise not only the financing of terrorist acts but also the financing of terrorist organisations and individual terrorists even in the absence of a link to a specific terrorist act or acts. Countries should ensure that such offences are designated as money laundering predicate offences.

SR4 (Targeted financial sanctions related to terrorism and terrorist financing): Countries should implement targeted financial sanctions regimes to comply with United Nations Security Council resolutions relating to the prevention and suppression of terrorism and terrorist financing. The resolutions require countries to freeze without delay the funds or other assets of, and to ensure that no funds or other assets are made available, directly or indirectly, to or for the benefit of, any person or entity either (i) designated by, or under the authority of, the United Nations Security Council under Chapter VII of the Charter of the United Nations, including in accordance with resolution 1267 (1999) and its successor resolutions; or (ii) designated by that country pursuant to resolution 1373 (2001).

Key Recommendations rated “Partially Compliant” or “Non-Compliant”

R3 (Confiscation and provisional measures): Countries should ensure that they have policies and operational frameworks that prioritise asset recovery in both the domestic and international context. Taking into account the Vienna Convention, the Palermo Convention, the United Nations Convention against Corruption, and the Terrorist Financing Convention, countries should have measures, including legislative measures, to enable their competent authorities to: a) identify, trace and evaluate criminal property and property of corresponding value; b) suspend or withhold consent to a transaction; c) take any appropriate investigative measures; d) expeditiously carry out provisional measures, such as freezing and seizing, to prevent any dealing, transfer or disposal of criminal property and property of corresponding value; e) confiscate criminal property and property of corresponding value through conviction-based confiscation; f) confiscate criminal property through non-conviction based confiscation; g) enforce a resulting confiscation order; and h) ensure effective management of property that is frozen, seized or confiscated.

R23 (Regulation and supervision of financial institutions): Countries should ensure that financial institutions are subject to adequate regulation and supervision and are effectively implementing the FATF Recommendations. Competent authorities or financial supervisors should take the necessary legal or regulatory measures to prevent criminals or their associates from holding, or being the beneficial owner of, a significant or controlling interest, or holding a management function in, a financial institution. Countries should not approve the establishment, or continued operation, of shell banks. For financial institutions subject to the Core Principles, the regulatory and supervisory measures that apply for prudential purposes, and which are also relevant to money laundering and terrorist financing, should apply in a similar manner for AML/CFT purposes. This should include applying consolidated group supervision for AML/CFT purposes. Other financial institutions should be licensed or registered and adequately regulated, and subject to supervision or monitoring for AML/CFT purposes, having regard to the risk of money laundering or terrorist financing in that sector. At a minimum, where financial institutions provide a service of money or value transfer, or of money or currency changing, they should be licensed or registered, and subject to effective systems for monitoring and ensuring compliance with national AML/CFT requirements.

R26 (Financial intelligence units): Countries should establish a financial intelligence unit (FIU) that serves as a national centre for the receipt and analysis of: (a) suspicious transaction reports; and (b) other information relevant to money laundering, associated predicate offences and terrorist financing, and for the dissemination of the results of that analysis. The FIU should be able to obtain additional information from reporting entities, and should have access on a timely basis to the financial, administrative and law enforcement information that it requires to undertake its functions properly.

R35 & SR1 (International instruments): Countries should take immediate steps to become party to and implement fully the Vienna Convention, 1988; the Palermo Convention, 2000; the United Nations Convention against Corruption, 2003; and the Terrorist Financing Convention, 1999. Where applicable, countries are also encouraged to ratify and implement other relevant international conventions, such as the Council of Europe Convention on Cybercrime, 2001; the Inter-American Convention against Terrorism, 2002; and the Council of Europe Convention on Laundering, Search, Seizure and Confiscation of the Proceeds from Crime and on the Financing of Terrorism, 2005.

R36 & SR5 (Mutual legal assistance): Countries should rapidly, constructively and effectively provide the widest possible range of mutual legal assistance in relation to money laundering, associated predicate offences and terrorist financing investigations, prosecutions, and related proceedings. Countries should have an adequate legal basis for providing assistance and, where appropriate, should have in place treaties, arrangements or other mechanisms to enhance cooperation. In particular, countries should: (a) Not prohibit, or place unreasonable or unduly restrictive conditions on, the provision of mutual legal assistance; (b) Ensure that they have clear and efficient processes for the timely prioritisation and execution of mutual legal assistance requests; (c) Not refuse to execute a request for mutual legal assistance on the sole ground that the offence is also considered to involve fiscal matters; (d) Not refuse to execute a request for mutual legal assistance on the grounds that laws require financial institutions or DNFBPs³ to maintain secrecy or confidentiality; (e) Maintain the confidentiality of mutual legal assistance requests they receive and the information contained in them, subject to fundamental principles of domestic law, in order to protect the integrity of the investigation or inquiry.

SR3 (Targeted financial sanctions related to terrorism and terrorist financing): Countries should implement targeted financial sanctions regimes to comply with United Nations Security Council resolutions relating to the prevention and suppression of terrorism and terrorist financing. The resolutions require countries to freeze without delay the funds or other assets of, and to ensure that no funds or other assets are made available, directly or indirectly, to or for the benefit of, any person or entity either (i) designated by, or under the authority of, the United Nations Security Council under Chapter VII of the Charter of the United Nations, including in accordance with resolution 1267 (1999) and its successor resolutions; or (ii) designated by that country pursuant to resolution 1373 (2001).

Other Recommendations rated “Partially Compliant”

R6 (Politically exposed persons): Financial institutions should be required, in relation to foreign politically exposed persons (PEPs) (whether as customer or beneficial owner), in addition to performing normal customer due diligence measures, to: (a) have appropriate risk-management systems to determine whether the customer or the beneficial owner is a politically exposed person; (b) obtain senior management approval for establishing (or continuing, for existing customers) such business relationships; (c) take reasonable measures to establish the source of wealth and source of funds; and (d) conduct enhanced ongoing monitoring of the business relationship. Financial institutions should be required to take reasonable measures to determine whether a customer or beneficial owner is a domestic PEP or a person who is or has been entrusted with a prominent function by an international organisation. In cases of a higher risk business relationship with such persons, financial institutions should be required to apply the measures referred to in paragraphs (b), (c) and (d). The requirements for all types of PEP should also apply to family members or close associates of such PEPs.

R11 (Record-keeping): Financial institutions should be required to maintain, for at least five years, all necessary records on transactions, both domestic and international, to enable them to comply swiftly with information requests from the competent authorities. Such records must be sufficient to permit reconstruction of individual transactions (including the amounts and types of currency involved, if any) so as to provide, if necessary, evidence for prosecution of criminal activity. Financial institutions should be required to keep all records obtained through CDD measures (e.g. copies or records of official identification documents like passports, identity cards, driving licences or similar documents), account files and business correspondence, including the results of any analysis undertaken (e.g. inquiries to establish the background and purpose of complex, unusual large transactions), for at least five years after the business relationship is ended, or after the date of the occasional transaction. Financial institutions should be required by law to maintain records on transactions and information obtained through the CDD measures. The CDD information and the transaction records should be available to domestic competent authorities upon appropriate authority.

R12 (DNFBPs: Customer due diligence): The customer due diligence and record-keeping requirements set out in Recommendations 10, 11, 12, 15, and 17, apply to designated non-financial businesses and professions (DNFBPs) in the following situations: (a) Casinos must conduct CDD when customers engage in financial transactions above the designated threshold. (b) Real estate agents must comply when facilitating property transactions for clients. (c) Dealers in precious metals and stones must apply CDD for cash transactions above the threshold. (d) Legal professionals and accountants must conduct CDD when handling transactions related to real estate, client asset management, bank or securities accounts, company formation, legal entity management, or business sales. (e) Trust and company service providers must comply when forming legal entities, acting as directors or trustees, providing registered office services, or acting as nominee shareholders. These measures enhance transparency and mitigate financial crime risks.

R14 (Tipping-off and confidentiality): Financial institutions, their directors, officers and employees should be: (a) protected by law from criminal and civil liability for breach of any restriction on disclosure of information imposed by contract or by any legislative, regulatory or administrative provision, if they report their suspicions in good faith to the FIU, even if they did not know precisely what the underlying criminal activity was, and regardless of whether illegal activity actually occurred; and (b) prohibited by law from disclosing (“tipping-off”) the fact that a suspicious transaction report (STR) or related information is being filed with the FIU. These provisions are not intended to inhibit information sharing under Recommendation 18.

R15 & R22 (Internal controls and foreign branches and subsidiaries): Financial institutions should be required to implement programmes against money laundering and terrorist financing. Financial groups should be required to implement group-wide programmes against money laundering and terrorist financing, including policies and procedures for sharing information within the group for AML/CFT purposes. Financial institutions should be required to ensure that their foreign branches and majority-owned subsidiaries apply AML/CFT measures consistent with the home country requirements implementing the FATF Recommendations through the financial groups’ programmes against money laundering and terrorist financing.

R16 (DNFBPs: Other measures): The requirements set out in Recommendations 18 to 21 apply to all designated non-financial businesses and professions, subject to the following qualifications: (a) Lawyers, notaries, other independent legal professionals and accountants should be required to report suspicious transactions when, on behalf of or for a client, they engage in a financial transaction in relation to the activities described in paragraph (d) of Recommendation 22. Countries are strongly encouraged to extend the reporting requirement to the rest of the professional activities of accountants, including auditing. (b) Dealers in precious metals and dealers in precious stones should be required to report suspicious transactions when they engage in any cash transaction with a customer equal to or above the applicable designated threshold. (c) Trust and company service providers should be required to report suspicious transactions for a client when, on behalf of or for a client, they engage in a transaction in relation to the activities referred to in paragraph (e) of Recommendation 22.

R17 (Sanctions): Countries should ensure that there is a range of effective, proportionate and dissuasive sanctions, whether criminal, civil or administrative, available to deal with natural or legal persons covered by Recommendations 6, and 8 to 23, that fail to comply with AML/CFT requirements. Sanctions should be applicable not only to financial institutions and DNFBPs, but also to their directors and senior management.

R29 (Powers of supervisors): Supervisors should have adequate powers to supervise or monitor, and ensure compliance by, financial institutions with requirements to combat money laundering and terrorist financing, including the authority to conduct inspections. They should be authorised to compel production of any information from financial institutions that is relevant to monitoring such compliance, and to impose sanctions, in line with Recommendation 35, for failure to comply with such requirements. Supervisors should have powers to impose a range of disciplinary and financial sanctions, including the power to withdraw, restrict or suspend the financial institution’s license, where applicable.

R30 (Responsibilities of law enforcement and investigative authorities): Countries should ensure that designated law enforcement authorities have responsibility for money laundering and terrorist financing investigations within the framework of national AML/CFT policies. At least in all cases related to major proceeds-generating offences, these designated law enforcement authorities should develop a pro-active parallel financial investigation when pursuing money laundering, predicate offences and terrorist financing. Countries should ensure that competent authorities have responsibility for expeditiously identifying, tracing and initiating actions to freeze and seize criminal property and property of corresponding value. Countries should also make use, when necessary, of permanent or temporary multi-disciplinary groups specialised in financial or asset investigations. Countries should ensure that, when necessary, cooperative investigations with appropriate competent authorities in other countries take place.

R33 (Transparency and beneficial ownership of legal persons): Countries should assess the risks of misuse of legal persons for money laundering or terrorist financing, and take measures to prevent their misuse. Countries should ensure that there is adequate, accurate and up-to-date information on the beneficial ownership and control of legal persons that can be obtained or accessed rapidly and efficiently by competent authorities, through either a register of beneficial ownership or an alternative mechanism. Countries should not permit legal persons to issue new bearer shares or bearer share warrants, and take measures to prevent the misuse of existing bearer shares and bearer share warrants. Countries should take effective measures to ensure that nominee shareholders and directors are not misused for money laundering or terrorist financing

R37 (Mutual legal assistance): See R36. Countries should rapidly, constructively and effectively provide the widest possible range of mutual legal assistance in relation to money laundering, associated predicate offences and terrorist financing investigations, prosecutions, and related proceedings. Countries should have an adequate legal basis for providing assistance and, where appropriate, should have in place treaties, arrangements or other mechanisms to enhance cooperation.

R38 (Mutual legal assistance: freezing and confiscation): Countries should have measures, including legislative measures, to take expeditious action in response to requests by foreign countries seeking assistance to identify, trace, evaluate, investigate, freeze, seize and confiscate criminal property and property of corresponding value. These measures should also enable countries to recognise and enforce foreign freezing, seizing, or confiscation orders. Further, countries should be able to manage property subject to confiscation at all stages of the asset recovery process and share or return confiscated property. Countries should have in place the widest possible range of treaties, arrangements, or other mechanisms to enhance cooperation in asset recovery.

SR8 (Non-profit organisations): Countries should identify the organisations which fall within the FATF definition of non-profit organisations (NPOs) and assess their terrorist financing risks. Countries should have in place focused, proportionate and risk-based measures, without unduly disrupting or discouraging legitimate NPO activities, in line with the risk-based approach. The purpose of these measures is to protect such NPOs from terrorist financing abuse, including: (a) by terrorist organisations posing as legitimate entities; (b) by exploiting legitimate entities as conduits for terrorist financing, including for the purpose of escaping asset-freezing measures; and (c) by concealing or obscuring the clandestine diversion of funds intended for legitimate purposes to terrorist organisations.

Other Recommendations rated “Non-Compliant”

R21 (Higher-risk countries): Financial institutions should be required to apply enhanced due diligence measures to business relationships and transactions with natural and legal persons, and financial institutions, from countries for which this is called for by the FATF. The type of enhanced due diligence measures applied should be effective and proportionate to the risks. Countries should be able to apply appropriate countermeasures when called upon to do so by the FATF. Countries should also be able to apply countermeasures independently of any call by the FATF to do so. Such countermeasures should be effective and proportionate to the risks.

R24 (Regulation and supervision of DNFBPs): Designated non-financial businesses and professions should be subject to regulatory and supervisory measures as set out below. (a) Casinos should be subject to a comprehensive regulatory and supervisory regime that ensures that they have effectively implemented the necessary AML/CFT measures. At a minimum: casinos should be licensed; competent authorities should take the necessary legal or regulatory measures to prevent criminals or their associates from holding, or being the beneficial owner of, a significant or controlling interest, holding a management function in, or being an operator of, a casino; and competent authorities should ensure that casinos are effectively supervised for compliance with AML/CFT requirements. Countries should ensure that the other categories of DNFBPs are subject to effective systems for monitoring and ensuring compliance with AML/CFT requirements. This should be performed on a risk-sensitive basis.

R25 (Guidance and feedback): The competent authorities, supervisors and SRBs should establish guidelines, and provide feedback, which will assist financial institutions and designated non-financial businesses and professions in applying national measures to combat money laundering and terrorist financing, and, in particular, in detecting and reporting suspicious transactions.

R32 (Statistics): Countries should maintain comprehensive statistics on matters relevant to the effectiveness and efficiency of their AML/CFT systems. This should include statistics on the STRs received and disseminated; on money laundering and terrorist financing investigations, prosecutions and convictions; on property frozen, seized and confiscated; and on mutual legal assistance or other international requests for cooperation.

SR6 (Money or value transfer services): Countries should take measures to ensure that natural or legal persons that provide money or value transfer services (MVTS) are licensed or registered, and subject to effective systems for monitoring and ensuring compliance with the relevant measures called for in the FATF Recommendations. Countries should take action to identify natural or legal persons that carry out MVTS without a licence or registration, and to apply appropriate sanctions.

SR7 (Wire transfers): Countries should ensure that financial institutions include required and accurate originator information, and required beneficiary information, on wire transfers and related messages, and that the information remains with the wire transfer or related message throughout the payment chain. Countries should ensure that financial institutions monitor wire transfers for the purpose of detecting those which lack required originator and/or beneficiary information, and take appropriate measures. Countries should ensure that, in the context of processing wire transfers, financial institutions take freezing action and should prohibit conducting transactions with designated persons and entities, as per the obligations set out in the relevant United Nations Security Council resolutions, such as resolution 1267 (1999) and its successor resolutions, and resolution 1373(2001), relating to the prevention and suppression of terrorism and terrorist financing.

SR9 (Cash couriers): Countries should have measures in place to detect the physical cross-border transportation of currency and bearer negotiable instruments, including through a declaration system and/or disclosure system. Countries should ensure that their competent authorities have the legal authority to stop or restrain currency or bearer negotiable instruments that are suspected to be related to terrorist financing, money laundering or predicate offences, or that are falsely declared or disclosed. Countries should ensure that effective, proportionate and dissuasive sanctions are available to deal with persons who make false declaration(s) or disclosure(s). In cases where the currency or bearer negotiable instruments are related to terrorist financing, money laundering or predicate offences, countries should also adopt measures, including legislative ones consistent with Recommendation 4, which would enable the confiscation of such currency or instruments.