South Africa added to dirty-money grey list

South Africa has been placed on a global financial watchdog’s so-called grey list denoting nations with shortcomings in tackling illicit financial flows, a move that scars the country’s international reputation and may raise costs for banks and asset managers.

The decision was announced by the Financial Action Task Force on Friday. Nigeria, Africa’s largest economy, was also added to the list, it said.

A 2019 evaluation concluded that Africa’s most-industrialized economy fell short of meeting all 11 of the FATF’s effectiveness measures to combat money laundering and the financing of terrorism.

Those findings followed an era of endemic graft during former President Jacob Zuma’s nine-year rule.

While President Cyril Ramaphosa’s administration, which took over after the ruling party forced Zuma to quit in early 2018, has sought to address the deficiencies, it failed to do enough to avoid censure.

The central bank has previously warned that grey-listing could have wide-reaching consequences for South Africa’s financial system, including triggering capital and currency outflows and increasing transactional, administrative and funding costs for banks.

Finance Minister Enoch Godongwana last month said the country was “hopeful” that the regulatory amendments to address the country’s shortcomings in tackling illicit financial flows would help it avert being classified as a jurisdiction subject to increased monitoring.

In December, Ramaphosa signed two key pieces of legislation into law that addressed some of the watchdog’s concerns.

South Africa’s inclusion on the grey list puts South Africa on par with the likes of Syria, the Democratic Republic of Congo and South Sudan. The National Treasury has said it is studying how Mauritius and other nations managed to get themselves removed from the grey list.


Top JSE indices