It’s official — South Africa fails to avoid greylisting

Despite an energetic attempt by SA to avoid being greylisted, the task force wanted more evidence that SA was in a position to police two sets of new laws it has implemented to bring the country into line with international best practice. 

Finance Minister Enoch Godongwana hinted during his Budget speech this week that greylisting was likely, despite saying last year he was “hopeful” SA could avoid being placed on the list. Nigeria was also added to the list.

In what constitutes a kind of backhanded compliment, the Financial Action Task Force (FATF) said when it places a jurisdiction under increased monitoring, “it means the country has committed to resolve swiftly the identified strategic deficiencies within agreed time frames,” FATF said in a statement on Friday following a February 20-24 plenary meeting. “New jurisdictions subject to increased monitoring are SA and Nigeria.” 

The move constitutes a blow to SA’s international financial standing around the world, and the Reserve Bank has warned that greylisting could have wide-reaching consequences for SA’s financial system.

Although the bank has warned of capital and currency outflows, the more immediate problem is that it increases transactional, administrative and funding costs for the banking sector. 

Read more in Daily Maverick: "State Capture could be the nail in SA's greylisting coffin, experts agree"

The decision puts SA in the dog box internationally; it means SA is on par with countries like Syria, DRC, South Sudan, Burkina Faso and Haiti, to name just a few. 

In December, President Cyril Ramaphosa signed two key pieces of legislation, the General Laws (Anti-Money Laundering and Combating Terrorism Financing) Amendment Act and the Protection of Constitutional Democracy Against Terrorism and Related Activities Amendment Act in an effort to avoid greylisting. But FAFT clearly wants to see whether SA has the will and the ability to manage the structures it has now put in place.

Godongwana said in a written response to the announcement that he had informed the FATF President, Mr Raja Kumar, that the South African Cabinet has considered the Action Plan and committed to “swiftly and effectively address all outstanding deficiencies and strengthen the effectiveness” of its anti-money laundering regime.