On February 24, the Financial Action Task Force (FATF) announced that it had placed South Africa on its “grey list”. The group of countries has been identified by the financial watchdog as having “strategic deficiencies” that need to be addressed within an agreed time frame. Being graylisted could make it harder for South Africa to secure loans from foreign banks.
South Africa has been trying to avoid being added to the FATF gray list for some time. The country’s financial industry watchdog recently designated cryptocurrencies as financial products after the FATF raised concerns about the lack of regulation of such assets. Some commentators believe that this move will help South Africa avoid being included in the gray list.
However, recent FATF statements suggest that the country is not doing enough to avoid this outcome. In response, the South African Reserve Bank (SARB) pledged to “strengthen oversight to further enhance the dissuasion and proportionality of administrative penalties”.
The SARB also said banks and other financial institutions could play a role in addressing the deficiencies identified by the FATF. “SARB expects banks and other financial institutions within its remit to fully comply with all their obligations and to implement the high standards of regulation necessary to preserve and protect the integrity of the financial system. These actions, in addition to those taken and actions taken by South Africa’s Law enforcement and other authorities, contribute to an effective AML/CFT/CPF system,” the central bank said.
Being on the FATF gray list could make it difficult for South Africa to secure loans from foreign banks that may be wary of the regulator’s move, the report said. A 2021 IMF paper also suggested that countries on the gray list could see disruptions in the flow of capital into their economies.
South Africa’s addition to the FATF gray list is a major setback for the country. The government and financial institutions need to work together to address the flaws that regulators have identified and improve the country’s reputation on the global financial stage.