The implications for SA now that it’s on FATF’s grey list

South Africa’s greylisting by the Financial Action Task Force (FATF), as announced on Friday, has significant implications for the country’s economic growth and global competitiveness, but moves are already being made to satisfy the FATF.

The main implication of greylisting is that members of the international community are ‘warned’ that conducting business with the impugned country could facilitate terrorism financing and money laundering.

South Africa has taken certain measures to address FATF concerns:

1. In April 2022, the Investigating Directorate was established within the National Prosecuting Authority to prosecute individuals and entities that were involved in state capture. Besides, South Africa submitted several reports to the FATF, prosecuted several money laundering offenders, and utilised extraditions to get fugitive offenders. National Treasury also moved quickly to enact necessary legislation.

2. On 22 December 2022, the General Laws (Anti-Money Laundering and Combating Terrorism Financing) Amendment Act commenced after being signed by the president. The act amends five pieces of legislation, including the Companies Act, 2008, the Financial Intelligence Centre Act, the Financial Sector Regulation Act, 2017, the Nonprofit Organisations Act, 1997, and the Trust Property Control Act, 1988.

3. On 23 December 2023, the Protection of Constitutional Democracy Against Terrorist and Related Activities Amendment Act commenced after being signed by the president. This act expands the definition of terrorist activities, provides for crimes related to terrorist training, the joining of terrorist organisations, and the possession and distribution of publications with terrorism-related content.

4. In February 2023, South Africa made a high-level political commitment to work with the FATF and ESAAMLG [Eastern and Southern Africa Anti-Money Laundering Group] to strengthen the effectiveness of its AML/CFT [anti-money laundering and counter financing of terrorism] regime. Since the adoption of the Mutual Evaluation Report (MER) in June 2021, South Africa has made significant progress on many of the MER’s recommended actions to improve its system, including by developing national AML/CFT policies to address higher risks and newly amending the legal framework for TF [terrorist financing] and TFS [targeted financial sanctions], among others.


The implications of greylisting for South Africa are two-fold: reputational and economic.

South Africa now has a negative reputation in the global economy.

It may also be downgraded by credit rating agencies, which would affect the country’s ability to borrow on the international capital markets. 

The economic consequences of greylisting can be summarised as follows.

1. Less capital flows into South Africa 

According to a report by the International Monetary Fund (IMF), greylisting leads to a significant decrease in capital inflows. For vulnerable countries, this could result in a balance of payments crisis. This is because greylisting entails that all transactions of South African companies and individuals will be seen as high-risk transactions, resulting in complicated compliance and administrative duties, and likely disincentivising investment into and trade with South Africa.

2. Economic penalties might be imposed on South Africa 

FATF member states and other international bodies might impose economic penalties and similar measures against South Africa. International finance flows to and from SA will entail higher compliance obligations and transaction costs.

Regulators in the US, EU, and the UK might place restrictions on their banks regarding transacting with South African banks.

Read: Costs for banks and SOEs could spike if SA is greylisted [Feb 2023]

Some international financial institutions have policies that prevent them from doing business with greylisted countries, or at least limit the scope of business that can be conducted. Such restrictions will further impede business and foreign investment.

3. Less foreign direct investment (FDI)

Greylisting will discourage FDI in South Africa and reduce capital inflows.

It will raise the cost of doing business in South Africa, making foreign investors reluctant to invest in the economy.

This is because international counterparts will have to undertake increased due diligence when dealing with South African entities. As transaction costs rise, there is a disincentive to do business with South African firms.

South Africa will be viewed as a high-risk jurisdiction for business, so some foreign investors might take out their investments.

4. Decrease in South Africa’s external reserves

If there are lower capital inflows and FDI into South Africa, this could reduce external reserves as there will be less tax revenue.

5. Difficulty obtaining financing on the international market

Given the implications of greylisting, South African companies will find it harder to obtain financing from foreign lenders on the international capital markets, and from multilateral lenders such as the World Bank.

6. Decreased competitiveness of SA companies in the global economy

South African companies, due to enhanced monitoring, will face more requirements to prove sources of funding, leading to higher transaction costs and delayed execution of transactions. This will ultimately harm the competitiveness of South African companies and South Africa as a whole in the global market.

Financial institutions that rely heavily on global trade in their treasury departments will be heavily impacted.

Trading offshore will come with higher due diligence hoops to jump through and more red tape. Trading revenue is therefore going to decline.

The South African insurance industry will particularly be impacted. 

7. Climate adaptation will be impacted

South Africa urgently needs to adapt to climate change, and financing from international partners is needed.

At COP26 [the 2021 United Nations climate change conference], the US, EU, UK, France, and Germany pledged to give $8.5 billion to South Africa to finance its transition to a lower carbon economy. After greylisting, international finance flows to and from South Africa will be riddled with higher compliance obligations and transaction costs.

Even if South Africa does receive the funding, it is likely to need the support of other foreign investors and companies to successfully transition to a lower carbon economy.

Greylisting will make it harder for the country to achieve its ESG [environmental, social and governance] goals.

What does South Africa need to focus on?

The FATF has identified eight areas that South Africa needs to focus on which include, among others, improving South Africa’s risk-based supervision of identified risks.

South Africa is also required to improve its investigation and prosecution of serious and complex money-laundering and terrorist-financing activities.

Competent authorities are required to ensure that they have accurate and up to date beneficial ownership information.


It is important to note that, as Mauritius has shown, South Africa can come off the grey list within as little as two years if government and the private sector co-operate to take decisive actions to address the FATF’s concerns.

Government is clearly committed to these actions. Finance Minister Enoch Godongwana in his 2023 budget speech on 22 February, said the outstanding deficiencies would be addressed through regulations and the eight actions summarised above.

South Africa has a plan of action; it is now about implementation.

Read: SA’s greylisting: The journey to claw back credibility [Feb 2023]

This was written by the Webber Wentzel finance team