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Grey Listed

South Africa was placed on the FATF grey list in February 2023 due to poor controls to stop money laundering and funding of terrorism.

Now efforts are intensifying to try get off the grey list.

Who are the FATF?

The FATF, or Financial Action Task Force, is a global group that helps countries fight money crimes like money laundering and the funding of illegal activities, including terrorism.

They set rules to keep the world’s financial systems safe and check if countries are following these rules. If a country doesn’t meet their standards, it can be added to the “grey list” for extra monitoring.

Why Was South Africa Grey Listed?

This happened because the country didn’t fully meet international standards for stopping money laundering and preventing the funding of illegal activities like terrorism.

A lot of money was supposedly moving through SA and headed for terrorist organisations (like in northern Mozambique).

The FATF found weaknesses in how South Africa monitored financial activities and punished those breaking the rules. Being on the grey list means the country is under closer watch and needs to prove it is improving its systems to avoid more severe consequences (like blacklisting).

Grey listing vs Black listing

While blacklisting no longer exists for consumers in South Africa it does exist in regard to international finance and investment rules.

Grey listing (in this context) can be thought of as a financial “yellow card” while blacklisting is like a“red card.”

Like blacklisting, grey listing signals to the international community that a country’s financial systems have weaknesses in preventing crimes like money laundering and terrorism financing.

However, unlike blacklisting, which often cuts a country off from the global financial system entirely, grey listing imposes extra scrutiny and higher compliance costs.

If South Africa fails to fix the issues flagged by the FATF, it risks sliding closer to blacklisting, which would severely damage its financial relationships and economic stability.

Risks Mount if SA Stays on Grey List

With many eyes on South Africa’s economic progress, the South African Reserve Bank (SARB) has warned of serious financial consequences if the country remains on the Financial Action Task Force (FATF) grey list past June 2025.

The grey list signals heightened financial scrutiny, and failure to exit on time could impact the nation’s global financial standing.

Improved Financial Stability but Persistent Risks

The SARB’s latest Financial Stability Review shows there has been progress made.

We are seeing improved financial conditions due to an orderly general election, political stability from the so called Government of National Unity, better electricity supply, and a more favourable credit rating outlook. But lingering risks threaten these recent gains, including things like escalating global conflicts, rising public debt, household financial distress, and yes, the challenges of remaining on the grey list.

Grey listing itself brings significant risks, such as strained relationships with international banks increased compliance costs, and reduced access to global financial systems. Nobody likes to do extra work or be dealing with shady institutions.

Prolonged grey listing could also mess with South Africa’s ability to hedge interest rate and foreign exchange risks, further complicating things economically.

Getting Off the Grey List ASAP

To get off the grey list, South Africa must still resolve six key things by early 2025.

If this is done in time then this will pave the way for the FATF to do an on-site review in mid-2025 and that then means potential delisting by June 2025.

Failing to get things done in the next few weeks or months would extend the process, delaying any visit by the FATF mid year and pushing back any chance of delisting until possibly October 2025.

As the clock ticks, the SARB are taking strain trying to get everyone to implement the needed changes in time.