The Working Group on Financial Action, an international financial watchdog, announced on February 24 that South Africa has been added to its “gray list. Gray listing by the financial watchdog could make it more difficult for South Africa to obtain loans from foreign banks.
South Africa’s setback
The Financial Action Task Force (FATF), a global financial crime watchdog, has added South Africa to its gray list, a group of countries “committed to resolving identified strategic deficiencies promptly within an agreed time frame.” (FATF, p. 3). According to one report, the inclusion of South Africa on the FATF’s so-called gray list is a major reputational loss for the country, which had been eager to avoid being added to the list.
As Bitcoin.com News reported, South Africa’s financial industry regulator designated crypto as a financial instrument after the FATF expressed concerns about the lack of regulation of such assets. At the time, some commentators suggested that this move would help South Africa avoid getting gray-listed.
However, in a February 24statementthe South African Reserve Bank (SARB), however, in a February 24 statement, seemed to acknowledge that South Africa was not doing enough to avoid being gray-listed. Nevertheless, the bank vowed to “strengthen supervision and further enhance the restraint and proportionality of administrative actions.”
potential impact on capital flows
The SARB added that banks and other financial institutions also have a role to play in addressing the deficiencies identified by the FATF.
“The SARB expects banks and other financial institutions within its jurisdiction to fully comply with all obligations and applies the high level of supervision necessary to protect and safeguard the integrity of the financial system. These actions, coupled with measures and actions taken by law enforcement and other authorities within South Africa, will help to achieve an effective AML/CFT/CPF system,” the central bank said.
According to a Reuters report, being placed on the FATF’s gray list could make it more difficult for South Africa to obtain loans from foreign banks upset by the watchdog’s actions. The report also cites a 2021 International Monetary Fund document that suggests that countries on the list may be hampered in the flow of capital into their respective economies.
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