Investec Bank CEO Richard Wainwright said South Africa’s inclusion on the Financial Action Task Force (FATF) grey list is highly likely, but that most of the risk is already priced in.
The FATF is the global money laundering and terrorist financing watchdog which sets standards to prevent illegal activities that harm society.
South Africa is at risk of being included in the FATF grey list unless it implements measures to address its deficiencies in laundering money from crime and terrorism financing.
Although South Africa has started to address problems highlighted by the FATF, it remains at risk of grey listing.
A research report by Business Leadership South Africa puts the probability of grey listing at 85% come the FATF plenary in February next year.
The economic impact of grey listing could be limited or severe depending on how South Africa reacts to it.
Commenting on the situation, Wainwright said international banks and other financial institutions are closely following the situation.
“While there’s cause for hope, a real concern among investors is the potential grey listing of South Africa by the Financial Action Task Force,” he said.
Wainwright said South Africa’s inclusion on the grey list is highly likely, but added that the downside would be limited if the country acts quickly to remediate shortcomings.
“The short-term impact of that will be minimal. It’s bad because you get bunched with a bad group of people,” he said.
“It’s a sentiment issue, but the world understands it. The investors and the bankers that we talk to understand this.”
He said if South Africa is on the right track and doing the right things, investors will give the country the benefit of the doubt in the short term.
However, the problem can compound very seriously. “I would say if South Africa stays on the grey list for longer than 18 or 24 months, we could have some very serious issues,” he said.
Wainwright is confident that South Africa will be able to get off the list within a year or two.