In a move seen as a major setback for South Africa, the international financial watchdog, the Financial Action Task Force, announced on February 24 that it had added the country to its “grey list”. Being on the financial watchdog’s gray list potentially makes it difficult for South Africa to obtain loans from foreign banks.
A setback for South Africa
The global financial crime watchdog, the Financial Action Task Force (FATF), has added South Africa to its gray list, which is a group of countries “committed to rapidly addressing identified strategic deficiencies within agreed timeframes”. According to one report, South Africa’s inclusion on the FATF’s so-called gray list is a major reputational setback for the country, which is eager to avoid being added to the list.
As reported by Bitcoin.com News, a South African financial sector regulator has designated crypto as a financial product after the FATF expressed concerns about the lack of regulation of such assets. At the time, some commentators suggested that this change would help South Africa avoid the greylist.
However, in its February 24 statement, the South African Reserve Bank (SARB) apparently acknowledged that the country has not done enough to avoid greylisting. The bank, however, pledged to “strengthen its oversight and further increase the deterrence and proportionality of administrative sanctions issued”.
Potential impact on capital flow
The SARB added that banks and other financial institutions also have a role to play in addressing the deficiencies identified by the FATF.
“The SARB expects banks and other financial institutions under its purview to fully discharge all of their obligations and apply the high standard of supervision necessary to safeguard and protect the integrity of the financial system. These actions, when combined with measures and actions undertaken by law enforcement and other authorities in South Africa, serve to achieve an effective AML/CFT/CPF system,” the central bank said.
According to a Reuters report, being graylisted by the Gafi/FATF could make it difficult for South Africa to obtain loans from foreign banks troubled by the watchdog’s action. The report also cites a 2021 International Monetary Fund document that suggests countries on this list will sometimes see the flow of capital to their respective economies being disrupted.
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