South Africa two steps away from major win

South Africa only has two items to address before it can be considered for delisting from the Financial Action Task Force (FATF) greylist, which the National Treasury is optimistic about achieving by October 2025.

On Friday (21 February), the FATF issued a statement after its plenary meetings in Paris.

The statement acknowledged South Africa’s progress in addressing shortfalls in its anti-money laundering and counter-terrorism financing (AML/CFT) regime.

The FATF noted that South Africa had successfully addressed 20 of the 22 action items outlined in its Action Plan. 

Four of the six outstanding action items were upgraded, leaving only two key issues to be resolved by the next reporting period, which spans from March to June 2025. 

“If these remaining items are effectively tackled, South Africa could be considered for delisting from the greylist by October 2025,” it said. 

South Africa was placed on the FATF greylist in February 2023 after the FATF found the country’s ability to fight AML and CFT severely lacking. 

In response, South Africa made a high-level political commitment to work with the FATF and the Eastern and Southern Africa Anti-Money Laundering Group (ESAAMLG) to improve its AML/CFT regime. 

The country then developed an Action Plan aimed at addressing these strategic deficiencies.

Since then, significant progress has been made. According to the FATF, South Africa has improved its AML/CFT framework by ensuring that all relevant supervisors apply effective and proportionate sanctions. 

It has also enhanced the availability and accuracy of beneficial ownership information on legal entities.

The country has also demonstrated acceptable sanctions for non-compliance with these requirements. However, two critical areas still need attention.

These include demonstrating a sustained increase in investigations and prosecutions of serious and complex money laundering cases, as well as terrorist financing activities.

In a statement also published on 21 February, the National Treasury welcomed the FATF’s recognition of South Africa’s progress. 

Treasury praised the efforts of financial and non-financial regulators, beneficial ownership registries, and law enforcement agencies for their role in securing the upgrades of four action items. 

It noted the ongoing work by law enforcement agencies to address the two remaining action items. 

These involve demonstrating significant progress in the investigation and prosecution of serious and complex money laundering and terrorist financing cases.

Win for long-term economic growth

Treasury explained that the FATF’s decision to extend the reporting cycle for these two action items reflects the challenging nature of these requirements. 

“According to the FATF, countries must demonstrate sustained progress over successive reporting periods, proving the effectiveness of their AML/CFT systems. 

“South Africa’s investigation and prosecution teams are working closely under a prosecution-guided investigation strategy to meet the FATF’s expectations,” said Treasury.

It emphasised that achieving these improvements is crucial for being removed from the greylist and strengthening the country’s fight against crime and corruption.

National Treasury advisor Ismail Momoniat highlighted the importance of this process in rebuilding South Africa’s institutional capacity. 

He pointed out that state capture had significantly weakened the country’s institutions, undermining their ability to combat serious and complex money laundering cases effectively. 

“Through this greylisting process, our authorities have actually built their capability, and it will hold us in good stead so that they can act quicker and more strongly when it comes to cases of corruption,” Momoniat explained.

He added that strengthening the fight against money laundering also enhances South Africa’s ability to address cases of terror financing.

Momoniat outlined the economic benefits of being removed from the greylist, particularly in terms of reducing the cost of international financial transactions. 

Greylisting has subjected South Africa to enhanced due diligence requirements, meaning South African entities face increased scrutiny and documentation requirements when transacting with international counterparts.

This not only raises the cost of doing business but also slows down cross-border financial flows.

“If we were to get off the greylist, then other countries’ financial systems would have confidence that we have cleaned up our act and that they can transact with us without asking for more support documents,” Momoniat said. 

He added that smoother cross-border financial flows would benefit South Africa’s long-term economic growth, security, and global financial integration.