South Africa and Nigeria removed from money laundering ‘grey list’

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South Africa and Nigeria have been removed from a global financial crime watchdog’s “grey list”, a relief for banks and investors in Africa’s two biggest economies.

The Financial Action Task Force on Friday said South Africa and Nigeria are no longer subject to “increased monitoring”, more than two years after the Paris-based body flagged them for illicit finance risks.

Grey-listing triggers greater international bank scrutiny of transactions going through affected countries, in what the IMF has said amounts to a “large and statistically significant” chilling effect on capital flows.

The FATF first grey-listed South Africa and Nigeria, led by Bola Ahmed Tinubu, early in 2023 over failures to collect and co-ordinate intelligence on financial crimes and investigate and prosecute cases.

As a result, South Africa’s government led by President Cyril Ramaphosa in particular mounted a national effort to align regulations and speed up money-laundering case verdicts.

Years of decay under former president Jacob Zuma gutted law enforcement and the country’s ability to fight corruption.

“This is a watershed moment for South Africa’s financial sector and economy,” said Leila Fourie, chief executive of the Johannesburg Stock Exchange and chair of Operation Phumelela, a South African financial industry task force.

“Exiting the FATF grey list restores confidence in our financial system, strengthens our position as a leading African financial hub, and reaffirms our commitment to global standards of financial integrity,” she added.

Hafsat Abubakar Bakari, the head of the Nigerian Financial Intelligence Unit, said: his country’s removal “is a clear signal to the world that Nigeria can meet and exceed global standards in financial integrity”.

Mozambique and Burkina Faso were also removed from the FATF’s grey list on Friday after several years.

The G20-backed FATF can ultimately “blacklist” countries if they fail to heed its warnings, a penalty levied only on Iran, North Korea and Myanmar. A FATF blacklisting de facto cuts domestic banks off from international payment systems.

Iran ratified a UN convention against terrorist financing this month as part of efforts to overturn FATF blacklisting, which was imposed in 2020.

The country also sent delegates to the FATF’s plenary meeting in Paris this month for the first time in six years, according to state media.

The South African rand rose roughly 0.6 per cent to about 17.23 to the US dollar on Friday after the FATF decision.

The FATF announced changes to its grey-list criteria last year “to relieve pressures on least-developed countries and focus on those countries posing greater risks to the international financial system”.

Countries are now prioritised for so-called “active review” if their financial sectors are more than $10bn in size.