In a move seen as a major setback for South Africa, the international financial watchdog, the International Financial Action Task Force, announced on February 24 that it had added the country to its “grey list.” Being listed on the financial watchdog’s gray list potentially makes it more difficult for South Africa to obtain loans from foreign banks.
A setback for South Africa
The global financial crime watchdog, the Financial Action Task Force (FATF), added South Africa to its gray list, which is a group of countries that are “committed to promptly resolving identified strategic deficiencies within the agreed deadlines. According to a report, South Africa’s inclusion on the so-called FATF gray list is a major setback for the reputation of the country, which has been eager to avoid being added to the list.
As reported by Bitcoin.com News, a South African financial industry regulator designated cryptocurrencies as a financial product after the FATF raised concerns about the lack of regulation of such assets. At the time, some commentators suggested that this move would help South Africa avoid being greylisted.
However, on his February 24 statement, the South African Reserve Bank (SARB) apparently acknowledged that the country has not done enough to avoid being greylisted. However, the bank promised to “strengthen its supervision and further improve the dissuasive and proportional nature of the administrative sanctions issued.”
Potential impact on capital flow
The SARB added that banks and other financial institutions also have a role to play in resolving the deficiencies identified by the FATF.
“The SARB expects banks and other financial institutions within its purview to fully comply with all their obligations and applies a high level of supervision that is necessary to safeguard and protect the integrity of the financial system. These actions, when combined with measures and actions taken by law enforcement and other authorities within South Africa, serve to achieve an effective AML/CFT/CPF system,” the central bank said.
According to a Reuters report, being on the FATF gray list could potentially make it more difficult for South Africa to obtain loans from foreign banks disturbed by the watchdog’s move. The report also cites a 2021 International Monetary Fund document that suggested that countries on this list will sometimes see the flow of capital to their respective economies disrupted.
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