According to the FATF Recommendations, what should financial institutions do when dealing with high-risk countries?

While prohibiting all transactions could seem like a safe approach, it is not a recommended practice according to the FATF. Financial institutions are expected to manage risks rather than completely avoid transactions. Prohibitions can hinder legitimate business while failing to address potential risks through proper due diligence.

Limiting transactions to domestic customers does not address the risks associated with high-risk countries. The FATF encourages institutions to undertake risk-based approaches rather than imposing blanket limitations, which could exclude legitimate international business activities.

Outsourcing compliance may help manage tasks, but it does not absolve financial institutions of their responsibility to perform due diligence. The FATF Recommendations emphasize that institutions must ensure adequate internal controls and cannot rely solely on third parties for compliance management.