A year in review: South Africa’s ongoing journey after greylisting by the FATF
26 Feb, 2024

James George, Compliance Manager, Compli-Serve SA

 

 

The 24th of February 2024 marked one year of greylisting by the Financial Action Task Force (FATF) for South Africa, and it continues to grapple with the fallout. As we reflect on the last 12 months, there has been progress but the path ahead remains challenging.

 

 

South African entities, including businesses and government agencies, have struggled to access international finance at competitive or feasible interest rates during this period. The country’s ability to secure favourable international loans and financing for critical infrastructure projects has been compromised to a certain extent.

 

 

Reduced access to international markets and finance has hindered development and job creation, while increased scrutiny of cross-border transactions and financial activities affects the smooth flow of goods and services. This has an impact on the competitiveness of South African exports and imports on the global stage.

 

 

South Africa has also seen the potential loss of financial business to neighbouring countries or other financial centres that are not facing the same scrutiny. The tarnishing of South Africa’s reputation as a global financial and business centre remains a significant challenge. Rebuilding trust and confidence in our financial system and regulatory framework is an ongoing process, far from an overnight solution.

 

 

This extended period of greylisting has deterred investors, both domestic and foreign, from engaging with the South African market. Investors typically seek stability and confidence in the regulatory environment, and South Africa’s status has not been conducive to attracting capital.

 

 

To address FATF recommendations and deficiencies, South Africa has had to enact stricter regulations and enforcement measures. While necessary to enhance the anti-money laundering and combating funding of terrorism framework, these measures have added to the regulatory burden on businesses and financial institutions.

 

 

Compliance costs have increased, as local businesses and financial institutions have invested in enhanced anti-money laundering and combating funding of terrorism compliance measures. This includes implementing advanced technologies for monitoring and reporting suspicious activities. The associated costs have strained corporate budgets and operational efficiency, increasing the cost of doing business in South Africa.

 

 

South African regulatory authorities have faced mounting pressure to address deficiencies and work towards international compliance during this year. This has led to more rigorous oversight and enforcement, potentially affecting the operational autonomy of financial institutions.

 

 

While progress has been made during this year, there is still much to be done to address and restore the nation’s financial integrity and international standing. Investigating and prosecuting complex money laundering and terrorism financing cases, identifying informal channels for global money remittance, and recovering assets lost to crime and corruption are ongoing challenges.

 

 

The financial services industry plays a pivotal role in identifying and reporting suspicious activities, necessitating ongoing capacity building and knowledge sharing. Adopting innovative technologies and data analytics enhances the detection and prevention of illicit financial flows. Continuous education, training, and awareness-raising are essential.

 

 

Through ongoing collaboration and commitment, South Africa aims to emerge from the greylist by early 2025, showcasing its dedication to a strong and transparent financial system, and reclaiming its position as a respected and reliable player in the global financial arena.

 

 

 

ENDS

Author

@James George
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