Greylisting: Can South Africa dodge the bullet?

Greylisting is a serious concern for South Africa as the Financial Action Task Force takes a close look at the country.

Greylisting is a major concern for South Africa, but has the country done enough to avoid being greylisted by the Financial Action Task Force, the global anti-money laundering and terrorist financing body? “Greylisting has potentially serious implications for the economy, increasing the cost of financial transactions with the rest of the world,” said Business Leadership South Africa (BLSA) CEO Busi Mavuso.

South Africa’s National Prosecuting Authority has worked hard to rack up the number of cases related to state capture, while institutions from the South African Revenue Service (SARS) to the Financial Intelligence Centre (FIC) have implemented new measures to combat money laundering. “The question that business needs to know, though, is whether it will be enough to convince FATF?” questions Mavuso. BLSA has commissioned research in this regard that it will unveil on 11 October.

Greylisting: The impact

Greylisting will make it harder to do business for anyone operating financial accounts abroad or dependent on foreign financial services providers. The implications for South Africa’s integration into the international economy are clear.

“Some have compared greylisting to the loss of investment grade credit rating,” pointed out Mavuso. “There are similarities as counterparts all adjust their views of the risk of doing business with South Africa – this time it will be reputational risk whereas a downgrade shifts perceptions of credit risk.”

Ineffective prosecutions

Greylisting is mainly a result of the collapse of commercial crime investigation and prosecution during the state capture era in South Africa. “We are facing the consequences for our inability to mount effective prosecutions for crimes like money laundering and terrorist financing,” warned Mavuso.

“FATF aims to support countries to meet its recommendations and expectations for the effectiveness of supervision, investigation and prosecution related to money laundering and terrorist financing. This is closely very much allied to the interest of business in seeing effective policing, investigation and justice for commercial crime,” she said.

In order to do what it can to assist in remedying the situation, BLSA has signed a memorandum of understanding to support the National Prosecuting Authority to access skills in the private sector needed for investigations and to develop cases.

The South African government is currently considering a range of legislative steps to combat the threat of greylisting.