The Financial Action Task Force (FATF), an intergovernmental organization that establishes worldwide protocols to fight against money laundering and financing of terrorism, has placed South Africa on the grey list.
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This list could harm the country’s global standing and potentially increase expenses for financial institutions and asset managers.
By placing South Africa on the grey list, the FATF has indicated to financial institutions, investors, and banks worldwide that the country is not entirely conformant with the anti-money laundering and terrorist financing principles. The FAFT made this determination during a gathering in Paris this week and officially declared on Friday, 24 February 2023, that Nigeria and South Africa have been included on the grey list, joining countries such as Syria, Haiti, Yemen and Mozambique.
As reported by News24: Friday’s verdict was unsurprising. During his budget speech in Parliament on Wednesday, Finance Minister Enoch Godongwana cautioned that South Africa should “brace for the likelihood” of being greylisted.
Following the declaration on Friday, Godongwana stated that South Africa will promptly and efficiently address all remaining inadequacies and enhance the efficiency of its anti-money laundering and counter-terrorism financing system. He further added that the Cabinet had examined the strategy presented by the FATF and pledged to collaborate actively with the watchdog.
Godongwana said, “Government recognises that addressing the action items will be in the interest of South Africa, and that doing so is consistent with our existing commitment to rebuild the institutions that were weakened during the period of state capture, the effectiveness of which is essential to addressing crime and corruption.”
Greylisting is projected to raise the expense of conducting business in South Africa by expanding the extent of due diligence that companies are required to conduct. South Africans may experience additional difficulties when transferring funds abroad and engaging in transactions with foreign banks.
In the past, greylisting has also resulted in a reduction in foreign investment.
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