Global watchdog Financial Action Task Force has removed Pretoria from its gray list, where it had been since 2023 for failing to curb money laundering
South Africa’s exit from the Financial Action Task Force (FATF) gray list shows Pretoria’s intensifying fight against corruption and other financial crimes, President Cyril Ramaphosa has said.
”Our country’s exit from the Financial Action Task Force (FATF) gray list bodes well for the integrity and reputation of our financial system, for our status as an investment destination, and for the economy as a whole,” Ramaphosa wrote in his weekly newsletter.
The FATF is a global body that aims to tackle money laundering and terrorist financing. In 2023, South Africa was placed on its gray list for failing to meet certain international standards.
Ramaphosa said that more than two years after the FATF identified deficiencies that had left South Africa increasingly vulnerable to financial crimes, the dedication of a multidisciplinary team led by the National Treasury had culminated in the country’s formal exit from the gray list.
“In its statement, FATF welcomed the significant progress South Africa has made in improving its anti–money laundering and counter–terrorism financing regime, and called for these improvements to be sustained,” he said.
On Friday, the FATF announced that South Africa was among four African countries delisted from its gray list of nations under increased monitoring for deficiencies in combating money laundering and terrorist financing. South Africa was gray–listed in February 2023 after the FATF identified 22 shortcomings in the country’s anti–money laundering and counter–terrorist financing (AML/CFT) framework.
The FATF, the global financial crime watchdog, had instructed South Africa to pursue money laundering and terrorist financing in line with its risk profile, including by proactively seeking international cooperation, detecting and seizing illicit cash flows, and improving the availability of beneficial ownership information. It said that while South African authorities carried out some successful money laundering investigations, the proactive identification and investigation of laundering networks and professional enablers were lacking.
Authorities were also urged to make better use of the financial intelligence products provided by the Financial Intelligence Centre (FIC) and to improve the application of the risk–based approach by obligated entities and supervisors. FATF President Elisa de Anda Madrazo said the decision to delist South Africa reflected the significant progress the country had made in strengthening financial integrity and oversight. ”South Africa has sharpened tools to detect money laundering and terrorist financing,” she said.
Meanwhile, Ramaphosa described the development as a milestone and a boost for South Africa’s international reputation and global standing. Gray listing, he said, resulted in a country being viewed as risky for investors.
”The practical implications are that countries have greater difficulties obtaining credit and access to international financial services. There is reduced foreign direct investment and even capital outflows, as well as restrictions on cross–border transactions,” he said. ”International investors seeking to do business in any country need assurance that its financial system is clean, transparent, robust and compliant with global standards.”
He said the perception of increased risk affects citizens and businesses financially. ”The cost of living and doing business can increase as a result of a weakened currency. As international borrowing becomes more expensive for businesses and governments, there is less fiscal space for social spending and tax pressures increase.
”Investor hesitancy leads to less foreign direct investment, which in turn impacts job creation and the sustaining of existing jobs,” he said. Ramaphosa said South Africa’s exit from the gray list would ease pressure on citizens, businesses and the government.
”Ultimately, the return of international financial confidence and a reduced risk perception will attract more foreign direct investment. As our currency strengthens, the cost of living for citizens and the cost of doing business will improve.
“The far–reaching regulatory and institutional reforms we have instituted as part of the FATF process are a clear demonstration of South Africa’s commitment to improving the business and investor climate, and to ongoing reform.”
He said the mandate of the Financial Intelligence Centre was expanded in 2022 when its founding legislation was strengthened to allow for more effective monitoring and detection of complex financial crime. ”Legislative amendments have been made to enable more stringent reporting regulations around beneficial ownership. This is so we know who ultimately owns, controls and benefits from a company, not just those who are listed as shareholders on paper.”
Ramaphosa said the changes would make it much more difficult for individuals and syndicates to funnel the proceeds of corrupt activities through complex webs of shell companies, trusts and entities owned by associates or relatives.
”To close high–risk loopholes around terrorism financing, we have introduced regulatory amendments to enable the investigation and prosecution of such cases. We are committing more government spending to counter money laundering and terrorism financing.
”The state capture era led to a near hollowing–out of state capacity and the weakening of key institutions involved in upholding the integrity of our financial system,” he said, adding that the government was steadily rebuilding them.
”Exiting the gray list demonstrates that our anti–money laundering system is beginning to act against corruption and other financial crimes. It lays the basis for further improvements.
“It is a signal of our collective determination to ensure that the malfeasance of the past is well behind us.”
He said South Africa must ensure that the FATF decision does not result in complacency but rather supports increased vigilance.
”Much work remains to be done to reduce and prevent financial crimes, and ensure speedier investigations, prosecutions and convictions of those committing such crimes.
”With the necessary regulatory frameworks in place, our focus must now be on improving and strengthening implementation. We will also sustain enforcement within both public and private institutions and deepen international collaboration,” Ramaphosa wrote.
