On February 24, the international financial crime watchdog, the Financial Action Task Force (FATF), announced that South Africa has been added to its “grey list”. This list consists of countries placed under scrutiny to implement standards to prevent money laundering and terrorism financing.

To get back into the FATF’s good books, South Africa is set to adopt a raft of legislative changes over the next three to five years to modernise the regulatory framework for financial institutions and align with international standards.

According to Astrid Ludin, deputy commissioner at the Financial Sector Conduct Authority, the country’s national treasury is also finalising a Conduct of Financial Institutions Bill  which seeks to streamline the licensing of financial institutions and improve disclosure requirements to provide greater visibility into their business practices. .

Additionally, the Financial Markets Act is also being reviewed and changes are expected to be submitted to parliament by the end of the year. Some of the expected changes include enhanced controls over short selling and securities financing transactions, and additional disclosure requirements of pre- and post- trading data to improve market surveillance.

According to Ludin, the FSCA will spend the next three years improving the digitisation of its systems to enable it to streamline its reporting requirements, remove redundancies, and facilitate the sharing of information with other regulators such as the prudential authority and the Financial Intelligence Centre.

Why was South Africa greylisted?

According to the country’s national treasury, South Africa performed poorly in its 2019 mutual evaluation by the FATF, as a result of many institutions being crippled by state capture under former president Jacob Zuma’s administration. 

The country was subsequently put under a one-year observation period in October 2021 to give it time to address the 67 recommended actions by the FATF following the evaluation.

In January 2023, an assessment of South Africa’s progress found that the country had managed to reduce the 67 recommended actions to 8 strategic deficiencies.

The FATF then took the decision to greylist South Africa until the deficiencies are addressed.

“In summary, the greylisting of a country means that its government has adopted an action plan to address deficiencies identified during its mutual evaluation after an observation period, and to implement such action plan within a defined time period, and with FATF monitoring such implementation,” said the National Treasury in a statement.

Following the greylisting, the South African government is working to address the deficiencies pointed out by the FATF by  the end of January 2025, to comply with the FATF’s standards.

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