South Africa and Nigeria are on track to exit the Financial Action Task Force’s (FATF) “grey list” as early as next month, signaling a significant turnaround for two of Africa’s largest economies. Both nations were placed under increased scrutiny in February 2023 due to deficiencies in addressing illicit financial flows.
Recent on-site assessments by the FATF in Paris have indicated substantial progress in the action plans implemented by South Africa, Nigeria, Burkina Faso, and Mozambique. According to sources familiar with the discussions, the final decision regarding their removal from the list is expected on October 24, during the FATF plenary session in France.
Lauren van Biljon, a senior portfolio manager at Allspring Global Investments UK Ltd, stated that exiting the grey list would positively influence market sentiment. She noted that it would affirm the effectiveness of the reforms enacted post-listing, even though the immediate market impact might be limited.
Following the news, South Africa’s FTSE/JSE Banks Index saw a slight uptick, trading 0.2% higher. The FATF’s recommendations are closely monitored by global investors, as greylisting can lead to reduced capital inflows and raise concerns over the integrity of financial systems.
In a 2021 report, the International Monetary Fund highlighted that countries on the grey list faced a significant drop in capital inflows, emphasizing the importance of compliance with anti-money laundering regulations.
South Africa’s National Treasury is set to comment on the FATF’s decision once it is announced. Previously, the Treasury noted that the country had substantially completed all 22 action items required for delisting. Nigerian government spokesman Temitope Ajayi expressed optimism about Nigeria’s potential removal, viewing it as a testament to the government’s efforts to enhance its attractiveness to investors.
Mozambique has reportedly fulfilled the 26 actions necessary for its delisting, while Burkina Faso has implemented all 37 required measures. Both countries are awaiting official confirmations.
The FATF, led by Mexican official Elisa de Anda Madrazo, has revised its grey-listing criteria, focusing more on wealthier member nations while lessening scrutiny on least-developed countries.
In addition to setting standards for combating money laundering and terrorist financing, the FATF also conducts research to establish best practices on emerging issues, including virtual assets and sextortion.