Expert ‘cautiously sceptical’ of SA’s exit from FATF greylist

A security expert is “cautiously sceptical” about National Treasury’s statement that South Africa will exit the Financial Action Task Force (FATF) greylist next year.

Jana de Kluiver, research officer at the Institute for Security Studies, said while SA remained on the greylist, it would harm the markets.

The primary focus should be on resolving the fundamental issues that had caused SA to be listed.

“These underlying issues not only discourage investment but also contribute significantly to the country’s economic challenges. Implementing the required FATF reforms is essential to establishing a stable and appealing investment environment in South Africa,” she said.

Treasury said SA likely to get off list in Feb 2025

Her remarks come in the wake of National Treasury saying that SA would likely get off the FATF greylist in February 2025. However, the country still has to address all 14 of the remaining Action Items to get off the list.

National Treasury said: “All relevant agencies and authorities will need to continue to demonstrate significant improvements, and also that such improvements are being sustained and are effective.”

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Azwifaneli Nemushungwa, from the economics department at the University of Venda, said SA’s prolonged presence on the FATF greylist threatened to impede its financial development and economic growth.

“When a country is greylisted, it loses its reputation as a viable partner for international transactions such as tourism financing and money laundering,” said Nemushungwa.

She said the greylist status damaged SA’s global standing, deterring foreign investment and limiting capital inflows and external reserves.

“Financial institutions that rely heavily on global trade will be negatively impacted as trading offshore will require higher due diligence and discourage foreign investment. This will lead to a reduction in capital inflows and South Africa’s external reserves,” she said.

Given that the minister of finance had remained unchanged, the same “may act as a challenge”, she said.

“Without new ideas or approaches, progress towards exiting the greylist may be slower than anticipated.”

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Implications of extended stay on greylist

De Kluiver said the implications of an extended stay on the greylist for local financial institutions and businesses were notable.

She said financial institutions, particularly banks, would continue to face increased scrutiny and more stringent oversight from international partners, leading to delays and higher operational costs for cross-border transactions.

“Compliance costs will continue to rise as institutions invest in advanced infrastructure and training to meet FATF standards. Investor confidence will continue to suffer as a prolonged stay on the greylist illustrates leadership’s inability to effectively address the underlying factors that caused the country to be greylisted,” she said.

But according to Dawie Roodt, with enough effort put into it, it was possible for SA to get off the greylist within a year or sooner.

He said the outstanding challenge was the perception that South Africa was funding terrorist organisations.