By Karabo Marifi
South Africa has made substantial progress in addressing the deficiencies identified by the Financial Action Task Force (FATF) to exit its grey list status. Currently, the country has successfully tackled 16 out of 22 action items in its Action Plan, with the remaining six scheduled for completion by February 2025. This significant milestone signals South Africa’s commitment to complying with international standards for anti-money laundering (AML) and counter-terrorist financing (CFT) regulations, a move critical for maintaining the nation’s financial stability and international reputation.
Background on FATF Grey Listing
The FATF grey list, formally known as the “increased monitoring” list, identifies countries with strategic AML/CFT deficiencies. Countries on this list, including South Africa since February 2023, must work closely with FATF to address these gaps to mitigate risks to the international financial system. South Africa’s grey listing raised concerns among investors and global stakeholders about the country’s financial oversight and governance standards, impacting its appeal as an investment destination.
Progress and Remaining Action Items
South Africa has largely or fully addressed 16 of the 22 items, leaving six critical areas to be resolved before the final FATF assessment in February 2025. These outstanding areas include the need to demonstrate a sustained increase in prosecuting complex money laundering and terrorism financing cases and improving the accessibility of beneficial ownership information for companies and trusts. Additionally, there is a focus on strengthening sanctions and oversight by designated AML/CFT supervisors to ensure compliance across financial sectors.
National Treasury welcomed the advancements made so far but acknowledged the complexity of meeting all requirements by the deadline. The interdepartmental committee led by Treasury has been coordinating efforts across various government agencies to address these action items, emphasising the need for sustainable and effective reforms.
Potential Impact of Exiting the Grey List
Should South Africa fulfil the remaining requirements by February 2025, FATF will conduct an onsite visit, likely around May, to verify the implementation and effectiveness of these changes. A positive assessment could lead to South Africa’s removal from the grey list in June 2025. Exiting the grey list would restore confidence among foreign investors and financial markets, as grey listing has historically affected the country’s creditworthiness and increased the costs of international transactions.
In contrast, failure to meet all obligations by the deadline would extend the grey listing period, requiring South Africa to report progress every four months until full compliance is achieved. This extension could delay the country’s removal from the list to October 2025 or beyond, further impacting economic recovery efforts.
Efforts to Enhance AML/CFT Compliance
South Africa’s drive to exit the grey list aligns with a broader strategy to strengthen its financial system and combat illicit financial activities. The interdepartmental committee, in collaboration with institutions like the Financial Intelligence Centre (FIC), has been instrumental in enforcing new compliance measures. These include improved monitoring of cross-border money transfers, enhanced data collection on beneficial ownership, and increased penalties for non-compliance among financial and non-financial entities.
Moreover, regulatory adjustments have been made to address high-risk areas, such as the financial flows associated with designated non-financial businesses and professions. These efforts aim to ensure that South Africa’s financial system is robust enough to prevent and detect money laundering and terrorism financing, critical for long-term economic stability.
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