In 2023, South Africa had the dubious distinction of ending up on the Financial Action Task Force (FATF) greylist. It’s not as bad as the blacklist, but still, it wasn’t good.
This focused attention on crypto platforms — or crypto asset service providers, to use the formal designation — because South African financial regulators had to step up scrutiny of money laundering and terror financing. They stressed that compliance is a strategic defence, not a box-ticking exercise.
This is a good thing. Compliance and regulation are essential if the crypto industry is to keep growing and offer investors products they can trust. Compliance tightens the relationship between regulated institutions such as Luno and banks and other financial institutions, bridging the divide between legacy finance and crypto applications beyond investment.
At the time of the greylisting, the FATF said South Africa’s laws and systems were not fully effective in detecting and stopping suspicious financial activities. There were gaps in regulating banks, casinos and other financial institutions, as well as weaknesses in monitoring transactions and enforcing penalties when rules were broken.
When a country is on the greylist, banks, investors and international partners are generally more cautious about doing business there, which can lead to stricter checks, higher costs and financial friction for companies and citizens.
The FATF has recently given South Africa the all-clear and taken it off the greylist.
The crypto industry has evolved from a largely unregulated frontier into a sector where transparency now rivals, and in some cases exceeds, that of traditional finance
The presidency attributed the delisting to the strengthening of the Financial Intelligence Centre’s powers to detect complex financial crime. New rules now require full disclosure of beneficial ownership, making it harder for corrupt actors to hide behind shell companies, trusts or relatives. Additional regulations target high-risk terrorism financing, backed by increased government resources to investigate, prosecute and prevent money laundering and terrorist activities.
In the words of FATF president Elisa de Anda Madrazo, South Africa “has sharpened the tools to detect money laundering and terrorist financing”.
The crypto industry has changed almost unrecognisably over the past decade. It has evolved from a largely unregulated frontier into a sector where transparency now rivals, and in some cases exceeds, that of traditional finance. Over the years, a solid foundation of regulatory trust has been built, and the industry bears the responsibility to uphold that confidence. It’s now more important than ever for the sector to strengthen its commitment to transparency and compliance.
De Wit is country manager for Luno South Africa
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