Standard Bank CEO Sim Tshabalala said it is unlikely that South Africa’s greylisting will be too prolonged or damaging to the country and that it will not affect Standard Bank’s business.
“Thanks to the increasing effectiveness of the National Prosecuting Authority, it is possible that South Africa’s greylisting will not be too prolonged or damaging,” he said.
In February, the Financial Action Task Force (FATF) added South Africa to a list of states that failed to meet international standards for money laundering and terrorism financing.
The states on this list are placed under increased monitoring, and South Africa was given two years to comply with the FATF’s requirement and get off the list.
Finance Minister Enoch Godongwana has stated his confidence that South Africa will be able to do so in record time.
Speaking on the Money Show with Bruce Whitfield, Godongwana said the government has already complied with regulatory reforms required by the FATF and must now only focus on policy implementation.
The impact of greylisting
The time it takes South Africa to get off the Financial Action Task Force grey list will not come without its costs.
Tshabalala acknowledged that the greylisting imposes “yet more unnecessary costs on the economy” and will further reduce the country’s competitiveness.
It will also slow the country’s economic growth and recovery following the Covid-19 pandemic.
Investec chief economist Annabel Bishop said greylisting is not expected to negatively affect growth directly. However, it will have indirect consequences, “including the potential reduction of portfolio flows and foreign direct investments”.
“The greylisting in itself does not represent any necessarily increased chance credit rating downgrade/s from the key agencies,” she said.
In particular, the country’s financial and banking sector is unlikely to be affected.
“The banking sector and legislation by and large already meet most of the FATF requirements, and many banks are well-placed to help clients with what will amount to likely extra paperwork and some delays.”
Godongwana has also said that even by FATF standards, the financial sector is not found wanting.
Tshabalala believes Standard Bank’s strong relationships with its international correspondent banks mean the greylisting will not have a “material direct effect on our business”.
Standard Bank has relationships with banks in London, New York, and the Middle East.
South Africa’s greylist status has proven not to be entirely harmless, and the local banking sector is not completely secure.
The capital outflow from foreign investors started in the third week of the year and accelerated in February and March.
DFM Global recently published data that revealed huge capital outflows from local equity and bond markets.
The latest net foreign purchases of South African equities and bonds reveal huge capital outflows from local equity and bond markets.
Over R170 billion in South African shares and bonds have been sold by international investors since the start of 2023.
DFM mentions South Africa’s greylisting as a likely reason for the negative net foreign purchases of South African assets, along with load-shedding and political uncertainty.
This data also comes in light of recent news that three South African banks have been implicated in money laundering schemes.
An Al Jazeera investigation revealed that key officials at Absa, Standard Bank, and Sasfin Bank helped criminals launder millions of dollars of dirty cash in exchange for bribes.
Following this news, Standard Bank told Al Jazeera it has a zero-tolerance stance on fraud and criminality and would report and assist in any legal investigation.