Everything you need to know about South Africa being greylisted

In February 2023, the Financial Action Task Force or FATF placed South Africa on its grey list because of concerns about our capacity to fight financial crime. In this article, we’ve explored what greylisting means, why South Africa was greylisted, and how it might impact you as an investor.

According to their website, the FATF is the “global money laundering and terrorist financing watchdog”. They set international standards and recommendations to prevent illegal activities from harming society. As a global inter-governmental body, the FATF also promotes policies relating to combating money laundering, terrorist financing, and financing the production and spread of weapons of mass destruction.

What is greylisting and why does it matter?

Before we get into why South Africa was greylisted, let’s discuss what greylisting is. Greylisting is when the FATF identifies gaps in a country’s systems that are supposed to monitor and counter money laundering and terrorism financing.

When a country is greylisted, it means its government has an action plan to address these gaps during its mutual evaluation after an observation period and that they will implement the plan in a defined period. Of course, the FATF monitors this closely.

Why was South Africa greylisted?

The FATF identified about 67 problem areas in South Africa’s financial crime legal framework with the 2021 Mutual Evaluation Report of South Africa. We were given one year to remedy these issues, and unfortunately, we didn’t quite make the cut.

Now, it’s not all doom and gloom. Our government actually managed to implement almost all of the recommendations, which already improved our country’s position. According to the FATF, despite being greylisted, South Africa has made a lot of progress, including strengthening our national anti-money laundering and financing policies.

Our legislative and regulatory framework is now compliant with the FATF’s standards, and none of our weaknesses relates to the controls of insurers or bankers (our banks follow global best practices already). The eight remaining problem areas are related to our law enforcement bodies implementing specific rules.

Thankfully, we know it’s possible to get off the grey list. Greylisting usually ends after three years of a country fixing the identified issues. Mauritius and Iceland managed to get off the grey list in under two years. South Africa simply needs to address and implement the enforcement issues and FATF recommendations to be removed from the grey list. Until these gaps are closed, the FATF will monitor our country closely.

Will greylisting impact you as a South African investor?

South Africa plans to get off the grey list by the end of January 2025, and who knows, it might even happen sooner! Because of the progress already made and the above positive timeline, we don’t believe the greylisting will affect the management of offshore investments or safekeeping of your assets. Cross-border transactions also won’t be a problem, although they might be subject to more scrutiny.

When it comes to domestic or offshore investments and life assurance products, investors shouldn’t be affected as long as all anti-money laundering and terrorist financing policies comply with the relevant regulatory requirements and best practices.

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