South Africa has been added to the Financial Action Task Force’s “grey list,” a status that could lead to difficult financing conditions for the country. The decision comes as a major setback for South Africa, which had hoped to avoid this designation.
South Africa Hopes to Avoid ‘Grey List’ Status for Non-Compliant Countries
South Africa has been eagerly trying to avoid being added to the so-called grey list of countries that are “committed to resolving swiftly the identified strategic deficiencies within agreed timeframes.” The inclusion on the list is a major setback for the country which has already faced significant reputational damage.
South Africa Could Be Hit Hard by FATF’s Grey Listing
As mentioned earlier, the SARB has warned that being on the FATF’s grey list could have a negative impact on the flow of capital into South Africa. Foreign banks may become perturbed by the watchdog’s move and refuse to lend South Africa money. This could lead to a decline in the country’s economic stability.
The IMF document from 2021 suggests that countries on the grey list will sometimes experience a decrease in the flow of capital into their respective economies. This can create instability and hinder economic growth.
Given these potential consequences, it is important for South Africa to resolve the deficiencies identified by the FATF. Doing so will show foreign banks that it is serious about reforming its financial system and improving compliance with international standards.
The South African government is desperately trying to avoid being placed on the ‘grey list’ of non-compliant countries by the Financial Action Task Force (FATF). This would mean that South Africa would be unable to participate in many global financial activities, and would be at a disadvantage when competing for business with other countries.