It seems South Africa is crawling back into the good books of the Financial Action Task Force (FATF), which unceremoniously put the country on its greylist a year ago. But South Africa is unlikely to have made sufficient progress to warrant reclassification before 2025.
In February 2023 the FATF placed South Africa on its greylist due to deficiencies in technical compliance and its inability to combat money laundering and the financing of terrorism. Greylisting has a reputational and economic impact — it can hamper a country’s ability to access international financial markets, discourage foreign investment, increase the cost of doing business and increase scrutiny from financial institutions and regulators.
National Treasury director-general Duncan Pieterse told journalists on Wednesday that the last update on South Africa’s status was in October. While South Africa has made considerable progress due to crucial reforms undertaken, it remains unclear whether these will be enough to remove the greylisting. Senior Treasury official Ismail Momoniat was absent from the tabling of the budget on Wednesday for the first time since 1998 this week due to his attendance at the FATF plenary in Paris.
The greylisting followed the 2021 publication of the mutual evaluation report in which the FATF identified compliance with just 20 of its 40 recommendations. In addition, it identified deficiencies in all 11 measures of the effectiveness of the system.
The government responded by building a financial system that it believed would be less vulnerable to abuse — and where abuses occurred, the perpetrators would be effectively prosecuted. The government’s new strategy, says the Budget Review, involves legislative and regulatory changes as well as improvements in the implementation and application of these laws and regulations.
As of October 2023, the FATF formally rerated 15 of the 20 deficiencies as no longer deficient. South Africa still needs to address five outstanding technical deficiencies.
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