The list consists of just two other nations, Iran and North Korea, which the FATF says have “significant strategic deficiencies in their regimes to counter money laundering, terrorist financing, and financing of proliferation.” While the designation doesn’t automatically trigger sanctions, FATF urges member countries to scale up due diligence measures that can make it harder for businesses and banks to work in Myanmar.

Rights groups say the junta has killed more than 2,300 people and arrested over 15,000 since seizing power on Feb. 1, 2021. Western governments responded with sanctions targeting army leaders and their businesses, but stopped short of overarching restrictions in an effort to preserve economic gains Myanmar had made during its short-lived transition to democracy and to avoid cutting it off from the global economy. But Friday’s action by the FATF suggests it may be difficult to walk that fine line.

“It’s a black mark against the country as a whole, so it’s going to have an impact on business decisions,” said Peter Kucik, a former senior U.S. Treasury official who is now managing director of the Washington office of Mercury Public Affairs. “The aggregation of sanctions, plus the blacklisting, plus the overall political trajectory of the country, altogether paints a very bad picture.”

This isn’t Myanmar’s first time on the blacklist. Before it turned toward democracy a decade ago, Myanmar suffered decades of isolation and underdevelopment under a military regime and was blacklisted by the FATF during that time. It was removed from the list in 2016 after a quasi-democratic government took charge and implemented financial changes. The U.S. and others were also lifting sanctions during that period to further encourage democratic change and bring Myanmar into the global fold.

But Myanmar didn’t do enough to investigate money laundering, prosecute offenders or confiscate assets, said the FATF in 2020, placing Myanmar on its so-called gray list that subjects nations’ financial systems to extra scrutiny. The group’s decision Friday to move Myanmar to its blacklist comes more than 20 months after the coup.

Myanmar’s economy suffered a double whammy from the coup and the Covid-19 pandemic, and any further exodus of foreign business would increase the pain. The country’s economy shrank 18% in 2021, according to the World Bank, rebounding to 3% growth this year from that modest baseline. The bank said poverty doubled over the past two years to 40% of the population, reversing a decade of progress.

Almost two dozen foreign firms have already withdrawn from the country amid concerns over security, reputational risks and a tightening web of financial sanctions. U.S. energy giant Chevron Corp., Norwegian telecoms firm Telenor ASA and Japanese beverage-maker Kirin Holdings Co. Ltd. are among those that have decided to leave.

Some have stayed, however. Manufacturing companies have faced a particularly tough dilemma because they provide a lot of jobs. Garment-makers including H&M Hennes & Mauritz AB have opted to stay. Earlier this month, Japanese car maker Toyota Motor Corp. announced that production at a new plant in Myanmar, which was put on hold after the coup, had begun.

Spokespeople for both H&M and Toyota cited concern for workers’ livelihoods as factors in their decisions.

The FATF was founded by the Group of Seven advanced economies in 1989 to set global standards for combating money laundering and financing terrorism. It places countries of concern in two categories, known as the blacklist and the gray list.

Countries on the gray list, officially called “jurisdictions under increased monitoring,” are those deemed to have “strategic deficiencies” in their oversight regimes but that have pledged to resolve them within a discrete time frame. If they don’t, they may be blacklisted.

The FATF on Friday added the Democratic Republic of Congo, Mozambique and Tanzania to its gray list. Nicaragua and Pakistan were removed from the list for progress toward improving their financial systems.

The group also took additional steps to sideline Russia, a member state since 2003, over its invasion of Ukraine. The FATF said Russia’s actions violate the group’s core principles, and as a result the country will be barred from participating in its current and future projects. The measures were in addition to the group’s decision in June to strip Russia of its leadership roles.