Dream come true for South Africa

South Africa is looking to make a very likely exit from the Financial Action Task Force’s (FATF) grey list in the coming months, with a positive decision expected in October 2025.

This follows an announcement by the FATF this month that South Africa has “substantially completed” all 22 action items that were raised when the country was put on the list in 2023.

According to the Bureau for Economic Research, this makes South Africa’s exit from the list likely, with the next step being an on-site visit before the FATF’s October plenary.

“If the outcome of the visit is positive, the FATF will delist SA from the grey list…in October 2025,” it said, adding that preparations for the on-site visit have already commenced.

“The removal will substantially reduce the regulatory burden placed on financial services firms and other entities when undertaking cross-border transactions, and it is positive overall,” the BER said.

An exit from the grey list in 2025 will be a dream come true for South Africa’s financial authorities, with the National Treasury, SARS and the South African Reserve Bank all pushing hard to make it a reality.

It would also make the country’s stay on the list one of the shorter stays. According to financial experts, it takes greylisted countries on average five to ten years to get removed from it.

South Africa was greylisted in February 2023, and an October exit would mean it spent two and a half years under the weight of the listing.

Countries like Iceland, Serbia and Malta managed to leave the grey list after just a year, while Mauritius managed to get off the list in under two years.

Others have been on for much longer, including Yemen, Syria and the Democratic Republic of the Congo, which have been on the list for over a decade.

After South Africa’s greylisting in 2023, Investec lead Richard Wainwright said the short-term impact of the move would be relatively immaterial; however, the impact will really be felt if it remained beyond 2025.

South Africa’s fight against illicit flows

The FATF grey list is officially known as “Jurisdictions under Increased Monitoring”.

It identifies countries working with the FATF to tackle weaknesses and deficiencies in their anti-money laundering (AML) and countering the financing of terrorism (CFT) frameworks.

Countries that do not comply or work with the FATF are ultimately blacklisted.

The consequence of being on the grey list is that any financial flows to and from listed countries come under much tighter scrutiny (and in some cases are disallowed entirely), leading to longer processing times and more complex administration.

In a nutshell, it makes doing any business in South Africa more difficult, thus the country becomes less competitive. In addition, it comes with significant reputational damage and hammers sentiment.

The initial FATF mutual evaluation report had 67 recommended actions which South Africa had to action.

By the time South Africa was greylisted, the country had already dealt with a significant number of concerns to try and stave off the listing, but major issues remained unresolved.

This included risk-based supervision of non-financial professionals and businesses that could potentially be used by criminals to launder money, and having complete information about the ultimate beneficial owners of companies, trusts and NPOs.

Anyone who had been keeping track of moves by the South African Revenue Service (SARS) over the past two years would know that the taxman has come down hard on trusts and beneficial owners.

Meanwhile, the Financial Intelligence Centre (FIC) has been turning the screw on non-financial professionals and businesses, homing in on lawyers and real estate agents in particular.

However, now over two years later, the National Treasury said its action plan to get off the grey list is all but complete.

“Improvements in these domains are critical not just for getting off the greylist, but for strengthening the fight against crime and corruption, and for contributing to the integrity of the South African financial system,” it said.

“Exiting the FATF greylist is a significant step forward as South Africa continues to improve and strengthen its supervisory and criminal justice systems,” National Treasury said on Friday.