The Financial Action Task Force (FATF) will host a plenary meeting next week where they are expected to decide whether South Africa will be greylisted.
The FATF is a financial crime watchdog which sets international standards to prevent crimes such as money laundering and financial terrorism.
The FATF add countries with “strategic deficiencies” in their ability to counter certain financial crimes to a greylist. Being greylisted means that South Africa would be under increased monitoring by the FATF.
The FATF plenary meeting will be held in Paris from 20 to 24 February.
At the last FATF plenary meeting in October last year, the Democratic Republic of the Congo, Mozambique, and Tanzania were all added to the greylist. Pakistan and Nicaragua were removed from the greylist owing to their compliance with FATF recommendations.
Business Leadership South Africa (BLSA) released a report in October last year which said that being greylisted would increase transaction costs for cross-border payments and cause reputational damage to the country.
The researchers who produced the BLSA report estimated that greylisting would reduce South Africa’s GDP by under 1% if the country works diligently with the FATF to combat deficiencies in combating financial crime.
They forecast a 3% hit to GDP if the country is slow and unwilling to meet the standards set out by the FATF.
The BLSA report said that South Africa has an 85% chance of being greylisted.
However, in January, parliament enacted anti-money laundering and combating terror financing laws aimed at improving compliance with recommendations for South Africa put forward in a 2021 mutual report by the FATF.
A statement from National Treasury after the new financial crime laws were enacted said that “South African authorities are of the view that these actions address almost all the technical compliance deficiencies that were identified in the Mutual Evaluation Report”.
“These laws will strengthen the fight against corruption, fraud and terrorism, and also assist South Africa in meeting the international standards.”
When these new laws were still being drafted in October, the director of the Financial Intelligence Centre, Xolisile Khanyile, told Sunday Times Business Times, that it is the implementation of South Africa’s laws that really matter.
“We have failed to deal with corruption and state capture, we’ve failed to even recover the assets that are the proceeds of crime and that have left the country due to state capture,” she said.
Khanyile does not expect to see South Africa escape greylisting.