Standard Bank group chief executive Sim Tshabalala has warned that South Africa’s greylisting by the Paris-based Financial Action Task Force would be worse than a credit rating downgrade and risks the country being kicked out of the global financial system.<\/p>\n
South Africa has previously been found wanting in all 11 of the task force\u2019s effectiveness measures to combat money laundering and the financing of terrorism.<\/p>\n
The central bank has previously warned the classification could have wide-reaching consequences for South Africa\u2019s financial system. Besides causing reputational damage, it could lead to capital and currency outflows, and transactional, administrative and funding costs for banks could increase, it said.<\/p>\n
Speaking to radio station 702<\/a><\/strong>, Tshabalala said being flagged by the task force would effectively lead to South Africa being blacklisted by both the United Kingdom and the European Union, which would kick the country out of the global financial system.<\/p>\n Not only would this make borrowing more expensive, it will likely also have several knock-on effects, he said.<\/p>\n “The rand will weaken, inflation will spike, interest rates will go up, it will be more expensive to buy food, pay for petrol, buy homes, buy cars. The country can\u2019t afford it.”<\/p>\n These concerns were echoed by Business Leadership South Africa chief executive Busisiwe Mavuso, who warned that South Africa is running out of time to avoid being greylisted.<\/p>\n “South Africa will find out early next year whether the FATF will place it on a list of countries considered to be performing poorly in the fight against major financial crimes,” she wrote in a News24<\/a> <\/strong>column on Friday (15 July).<\/p>\n “In other words, if we don’t get our act together by improving our ability to proactively pursue and prosecute money laundering and terrorist financing by February 2023, we could find ourselves on the FATF’s grey list \u2013 with highly negative consequences.<\/p>\n “These include enhanced scrutiny in relation to cross-border transactions that would harm imports and exports, reputational damage to our financial system as well as adverse effects on our banks in maintaining correspondent banking relationships with their offshore counterparts. This is the last thing we need right now.”<\/p>\n The head of South Africa\u2019s National Treasury said he is \u201cpretty confident\u201d the country will have addressed regulatory weaknesses in its money-laundering controls by year-end.<\/p>\n “Changing our laws and regulations will be tough, but that\u2019s the easy part,” Ismail Momoniat, the National Treasury\u2019s acting director-general said in an interview at the start of July.<\/p>\n “The tough part comes in that six of those measures are related to how we investigate such crimes \u2013 whether we have enough prosecutions on money laundering, whether we deal with terror financing when people are designated by the United Nations or by other measures \u2013 and so in our criminal justice sector, we have to have a significant turnaround in terms of effectiveness.”<\/p>\n
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