South Africa Makes Progress on AML Deficiencies, Eyes Potential Exit from FATF Grey List

The Financial Action Task Force (FATF) has acknowledged South Africa’s efforts to address deficiencies in its anti-money laundering (AML) framework, raising hopes that the country may soon be removed from the FATF’s "grey list." This list, which includes countries facing issues with their AML and counter-terrorism financing measures, often results in a downturn in international investment due to perceived financial system risks.

South Africa was added to the grey list in 2023 after FATF identified several areas where its AML regime fell short of FATF’s stringent standards. In response, the FATF provided South Africa with a roadmap detailing actions necessary to address its AML deficiencies, including a requirement to improve compliance with FATF’s 40 Recommendations. These recommendations form the global benchmark for AML and counter-terrorism financing measures, ranging from international cooperation on financial crime investigations to ensuring transparency in cross-border payments.

In a recent follow-up report, FATF upgraded South Africa’s ratings on three key recommendations. Previously rated as "Partially Compliant" in these areas, South Africa has now been raised to "Largely Compliant." These improvements address FATF standards on international assistance in financial crime investigations, terrorist financing prevention, and transparency in cross-border payments.

Despite this progress, South Africa remains "Partially Compliant" in two areas, specifically with respect to monitoring cash couriers and ensuring compliance for non-profit organizations (NPOs). When South Africa was first grey-listed in 2023, it was found to be "Non-Compliant" with five FATF recommendations and "Partially Compliant" in 15 areas. This recent follow-up is an interim update ahead of South Africa’s next formal "mutual evaluation report," scheduled for February 2025. The outcome of this review will likely determine whether South Africa remains on the grey list or can be removed.

When South Africa was initially grey-listed, some analysts predicted that the country could remain under FATF’s watch until at least 2026. However, South Africa’s central bank governor, Lesetja Kganyago, expressed optimism in March 2023, projecting that South Africa could achieve grey list removal by 2025 if current reforms continue to progress.

Governor Kganyago reflected on the impact of the grey list designation, describing it as “a costly episode for us.” He added, “The lesson is that joint efforts are required to look after the integrity of South Africa’s financial system. We all suffer when this is compromised.”

As South Africa works to meet the FATF's final two recommendations, the nation is steadily advancing toward its goal of being removed from the grey list, a shift that would signal strengthened financial integrity and potentially restore investor confidence.

By fLEXI tEAM