FATF puts South Africa and Nigeria on Anti Money Laundering Gray list

The global financial watchdog puts Africa’s two biggest economies on Anti-money laundering grey list over shortcomings in combating illicit finance.

On Friday, the Paris-based FATF (Financial Action Task Force) stated that it was placing Nigeria and South Africa on its “grey list” of nations requiring improved standards to fight financial crime, exposing them to greater scrutiny by banks and investors worldwide. 

FATF actions strongly impact a country’s financial integrity. The G-7-created body can ultimately “blacklist” banking systems over severe AML/CFT compliance deficiencies. 

South Africa is only the second G20 (world’s foremost and systemically essential economy) economy after Turkey to have been on the FATF grey list. The UAE, Albania, and Yemen are also among the greylisted nations. Iran, North Korea, and Myanmar are the only three countries that are blacklisted. 

South African banks have already stated that they have strengthened the controls to mitigate the effects of greylisting. “Importantly, the costs of increased monitoring will be substantially lower than the long-term costs of allowing South Africa’s economy to be contaminated by the flows of proceeds of crime and corruption,” the South African Treasury said on Friday.

South African president Cyril Ramaphosa’s government passed laws in 2022 to bridge gaps identified by FATF, but it has failed to show real progress in inquiring about and prosecuting organised crime and corruption scandals tied to the governing African National Congress. 

Nigeria was added to the grey list just a day before its presidential and parliamentary elections. 

According to FATF, South Africa has made “significant progress” in meeting recommendations for improving laws and developing better policies, and Nigeria “has made progress”, it added.

On Friday, the Central Bank of South Africa stated in response to the greylisting that it had a “zero-tolerance approach when addressing the abuse of the financial system by money launderers or terrorist financiers”.

“South Africa’s hard work resulted in most of the identified deficiencies being addressed within the 12-month observation period afforded to South Africa,” the reserve bank added.