May 29

South Africa’s grey listing and prospects for upliftment

Explained by Chief Operating Officer, Ryan Magee

A question that we are asked regularly following South Africa’s addition to the FATF grey listing, is what progress have we made to get off it? To answer this question, it’s important to revisit what exactly grey listing is and why South Africa was grey listed.

First, what is FATF and its grey list? The Financial Action Task Force abbreviated as FATF, is a global inter-governmental body that promotes policies and sets international standards relating to the combating of money laundering, terrorist financing, and the financing of the proliferation of weapons of mass destruction.

Why was South Africa grey listed? South Africa did poorly in its 2021 mutual evaluation, which was actually conducted in
2019 when many institutions (especially law enforcement agencies) were at their weakest following state capture. While no country is fully compliant with all 40 FATF recommendations and all 11 effective immediate outcomes, South Africa was deemed to have too many weaknesses in its legal framework and was deemed to be inadequately compliant with 20 of FATF’s recommendations in all 11 effectiveness immediate outcomes.

Consequently, South Africa was put under a one-year observation period in October 2021, giving the country time to address 67 Recommended Actions.

Positively, South Africa made significant progress during the observation period, passing two major Amendment Acts in 2022, and strengthening its institutions. A January 2023 assessment of SA’s progress found that the country had made significant and positive progress, reducing the 67 Recommended Actions to 8 strategic deficiencies, where more progress is required. Despite progress, South Africa was grey listed until these deficiencies are addressed satisfactorily.

What recent progress had been made by South Africa to get off the grey list? The country has improved its anti-money laundering and counter terrorism financing systems. It will also continue strengthening its capability to fight money laundering, terrorist financing, corruption, and other financial crimes. In this regard, continuously improving the integrity of the financial system is not merely a FATF exercise, but rather part of government’s objectives for the regulation of the financial sector.

National Treasury in particular is strengthening and expanding anti-money laundering systems in the financial sector, to minimise perceived risks, including from new and emerging areas such as crypto-currency related risks. This is because the biggest economic risks of being grey listed relates to the withdrawal of banking and payments services necessary for trade, remittances, and other transfers and economic growth. The Financial Sector Conduct Authority (FSCA) has also been targeting deemed non-compliant Financial Services Providers (FSPs) in line with FATF’s criteria and has been issuing bigger fines to demonstrate its enforcement capabilities.

What is the way forward for South Africa to get off the grey list? The completion of an assessment and the
publication of the mutual evaluation report by FATF is a starting point. South Africa subsequently reports back to the FATF on a regular basis on the progress it has made. This can lead to a change of the compliance ratings from the original mutual evaluation report.

After three years, it is expected that countries will have addressed most if not all the deficiencies related to the adequacy of laws to combat money laundering and terror financing that are identified in their mutual evaluation report.

The FATF will start with the next round of mutual evaluations in 2024, with the first mutual evaluation report being discussed at its October 2025 plenary meeting. It is expected that South Africa will be evaluated again in the fifth round during 2027/28 and based on the reported progress made currently, would potentially be removed from the grey list at that time.

We will keep you updated on any significant developments in the meantime.