National Treasury (NT) recently provided an update on South Africa’s greylisting progress. Recall, last year the Financial Action Task Force (FAFT) greylisted SA owing to strategic deficiencies related to anti-money laundering and countering the financing of terrorism. In terms of the potential impact on the economy, SA has been designated as ‘high risk’ in terms of financial transactions by both the EU and the UK. Institutions dealing with South Africa are forced to do due diligence with respect to listed companies on the JSE as well as derivatives trades, which come with added costs. South Africa has made progress in addressing many of the reservations highlighted by the FATF, and according to the officials, 67 improvements were made to satisfy the FATF, and only 22 have been left short.
To extricate itself from greylisting, South Africa must address all 22 problem areas within two years, and the country has now officially passed 15 of the 22 provisions sought by the FATF on technical compliance. The implementation of these improvements is also a consideration, and SA appears to be left wanting. The FATF wants to see more people being charged for illegal acts against SARS and would want to see more progress in the rate of prosecutions. Unfortunately, the NT presentation update brought little clarity. Treasury is unclear as to how much damage the greylisting has already inflicted on the economy other than to say that the longer that greylisting remains in place, the greater the economic damage likely to be inflicted. Looking ahead, there is no guarantee that once these measures are passed, the country will be moved from being greylisted, as the country prepares for the June 2025 determination of whether it can be removed from greylisting.