The world’s top financial crime watchdog will keep Myanmar on its blacklist due to its failure to make enough progress in combating money laundering and terrorist financing.

In a statement issued on Friday, the Paris-based Financial Action Task Force (FATF) said that it had called for the continued “application of enhanced due diligence” on Myanmar by its members, in part due to ongoing cyber scam activities in the country.

FATF, a Paris-based intergovernmental body established in 1989, describes itself as a “global money laundering and terrorist financing watchdog,” which helps to coordinate international efforts “to prevent organized crime, corruption, and terrorism.” In October 2022, it added Myanmar to its category of “high risk jurisdictions subject to a call for action,” commonly known as its blacklist, due to “strategic deficiencies” first identified in 2018. The only other countries currently on FATF’s blacklist are Iran and North ​Korea, whose designations were also reconfirmed on Friday.

The FATF blacklisting places Myanmar banks and financial entities outside the mainstream of the international financial system, and forces firms dealing with Myanmar citizens or companies to fulfill onerous reporting requirements.

The FATF said on Friday that as part of “enhanced due diligence,” financial institutions should “increase the degree and nature of monitoring” of business relationships involving Myanmar, “in order to determine whether those transactions or activities appear unusual or suspicious.”

In its statement, FATF issued a June assessment in which it found that “fraud and cyber scam activities in Myanmar remain extensive and present significant illicit finance risks.” While acknowledging that Myanmar’s new military-backed government has taken some steps to combat these operations, “the FATF reiterates its call on Myanmar to take appropriate action to address the illicit finance risks associated with fraud and cyber scam threats.” It said that it would “continue to work with Myanmar in this regard.” If no further progress is made by February 2027, the FATF added that it “will consider countermeasures,” including greater oversight and potential banking restrictions.

However, the FATF added that when applying enhanced due diligence, “countries should ensure that flows of funds for humanitarian assistance, legitimate [non-profit] activity and remittances are neither disrupted nor discouraged.”

The FATF announcement was unsurprising, given the extent to which online scamming and associated money laundering have grown in Myanmar since the 2021 coup, particularly in outlying regions of the country, and the largely cosmetic nature of the efforts to combat them. The post-coup conflict has also led to a spike in the production and trafficking of illicit drugs, particularly methamphetamines, in eastern Myanmar that shows no sign of abating.

However, the FATF statement was preceded shortly by a Reuters report claiming that Japan’s government was lobbying for FATF to remove Myanmar from the blacklist in hopes of encouraging business in the country. In particular, Tokyo hoped that the watchdog would “drop requirements that its members apply enhanced screening to financial transactions with Myanmar to avoid money ‌laundering and terrorist financing.” The report cited one anonymous source as saying that “at least one other major ⁠Asian country was pushing for Myanmar’s removal.”

While the efforts to remove Myanmar from the blacklist were not successful, Japan’s push was just the latest sign of a growing regional willingness to re-engage with Myanmar since direct military rule was replaced by a quasi-civilian administration in April.

Since then, coup leader-turned-president Min Aung Hlaing has been on a diplomatic offensive aimed at shoring up relationships with key partners and securing full reintegration into the Association of Southeast Asian Nations (ASEAN). The United States has also held direct talks with Myanmar officials on several occasions in the past few months, in some instances with support from the Japanese government.