By Bahle Gama
South Africa and Nigeria have been grey listed by the Financial Action Task Force (FATF). The decision was made during a meeting held in Paris on Friday.
The move by the intergovernmental body that sets global standards to combat money laundering and terrorist financing puts these countries alongside countries such as Mozambique, Syria, Yemen and Haiti.
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According to reports, FATF’s decision signals to global banks, financial institutions and investors that these countries are not fully compliant with anti-money laundering and terrorist financing standards.
In a statement on Friday afternoon, FATF said that South Africa and Nigeria had been added to the grey list. In terms of South Africa, It said that in recent months, the country has reportedly made significant progress on many of its recommended actions to improve its system, however, more work is said to be needed to increase investigations and prosecutions of money laundering, as well as the seizure of assets due to crimes.
Eight areas of improvement were identified. More reports state that the decision by FATF was not unexpected as when delivering the budget in Parliament on Wednesday, Minister of Finance Enoch Godongwana said the country should be prepared for the possibility of a grey listing.
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Grey listing is expected to hike the cost of doing business in South Africa by increasing the amount of due diligence companies have to carry out, and South Africans may also find sending funds offshore and transacting with international banks more difficult.
Historically, grey listing has reportedly also led to a decline in foreign investment. According to News 24, a report by research firm Intellidex noted last year that capital flows, foreign direct investment and portfolio inflows all tended to decline after a country was grey listed.