While South Africa has been making significant strides in strengthening its Anti-Money Laundering (AML) and Counter-Terrorist Financing (CFT) measures, it appears unlikely that the country will successfully exit the FATF greylist by the upcoming January 2025 meeting. Since being placed on the greylist in February 2023, South Africa has pledged to address its deficiencies; however, the progress made thus far may not be enough to satisfy the requirements by next year.

There have been noteworthy improvements in legal enforcement, such as the introduction of new provisions that target terrorist financing and enhance sanction regimes. Despite these advancements, the country still grapples with substantial challenges in prosecuting financial criminals. Even with a well-developed banking system and its position as a regional financial hub, South Africa’s extensive informal economy, combined with limited prosecutorial capacity, makes it an appealing target for financial crime.

A recent step forward is the establishment of a standalone digital evidence unit specifically designed to address FATF priorities. While this initiative is a positive development, it also raises concerns that compliance may still be viewed as a mere checkbox exercise rather than a serious commitment to combating financial crime. For South Africa to fully meet the FATF’s stringent requirements, the National Prosecuting Authority (NPA) must enhance its efficiency in managing cases, as existing gaps in this area are hindering overall progress.

On a positive note, several initiatives are emerging that could help the country move in the right direction. For instance, the 2022 Amendment Act has bolstered efforts to combat financial crime, and the Prudential Authority is adopting risk-based supervision practices. Additionally, the South African Revenue Service (SARS) has successfully rebuilt its capacity to target tax evaders and other financial criminals.

Crucially, cooperation between the private and public sectors is essential for success. Financial institutions are increasingly integrating advanced tools to streamline their AML compliance efforts. However, the pace of this progress is slower than needed to meet the looming deadline. If South Africa fails to meet this milestone, it will have to significantly ramp up its efforts to protect its financial reputation, as failing to do so could lead to even greater economic damage and a decline in investor confidence.

The road ahead is fraught with challenges, but with ongoing commitment and concerted action, South Africa can navigate these obstacles and work towards achieving its goal of being removed from the greylist.

Navigating the Grey: South Africa's Struggle to Exit the FATF Greylist