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South Africa and Nigeria have been removed from the global financial crime watchdog’s “grey list”, a relief for banks and investors in Africa’s two largest economies.
The Financial Action Task Force said on Friday that South Africa and Nigeria are no longer subject to the crisis “increased monitoring”more than two years after the Paris-based body caught them engaging in illegal financial risks.
The placing of gray lists leads to greater international supervision by banks of transactions passing through the affected countries, which according to the IMF amounts to a “large and statistically significant” chilling effect on capital flows.
The FATF first graylisted South Africa and Nigeria in early 2023, under the leadership of Bola Ahmed Tinubu, due to the inability to gather and coordinate intelligence on financial crimes and investigate and prosecute cases.
As a result, the South African government, led mainly by President Cyril Ramaphosa, has launched a national effort to align regulations and expedite rulings on money laundering.
Years of decline under former President Jacob Zuma have undermined law enforcement and the country’s ability to fight corruption.
“This is a turning point for South Africa’s financial sector and economy,” said Leila Fourie, managing director of the Johannesburg Stock Exchange and chair of Operation Phumelela, a task force of South Africa’s financial sector.
“Leaving the FATF gray list restores confidence in our financial system, strengthens our position as a leading African financial center and reaffirms our commitment to global financial integrity standards,” she added.
Hafsat Abubakar Bakari, the head of Nigeria’s Financial Intelligence Unit, said his country’s removal “sends a clear signal to the world that Nigeria can meet and exceed global standards of financial integrity.”
Mozambique and Burkina Faso were also removed from the FATF gray list on Friday after several years.
The G20-backed FATF could eventually “blacklist” countries if they fail to heed the warnings, a punishment only imposed on Iran, North Korea and Myanmar. A FATF blacklist de facto cuts off domestic banks from international payment systems.
Iran this month ratified a UN treaty against terrorist financing as part of efforts to overturn the FATF blacklist imposed in 2020.
The country also sent delegates to the FATF plenary meeting in Paris this month for the first time in six years, according to state media.
The South African rand rose about 0.6 percent to about 17.23 against the US dollar on Friday after the FATF decision.
The FATF announced changes to its gray list criteria last year “to ease pressure on least developed countries and focus on those countries that pose greater risks to the international financial system.”
Countries will now be prioritized for the so-called “active review” if their financial sector exceeds $10 billion.
