Greylisting a reflection of a failing Government
24 February 2023
The greylisting of South Africa by the Financial Action Task Force (FATF) is a damning indictment of our criminal justice system and the government's inability to combat financial crimes such as money laundering and terrorism financing. This situation has arisen primarily due to the inadequacy of our legal framework and the failure of the authorities to prosecute those responsible for such offenses.
The greylisting has placed our nation at significant risk, as the rest of the world now views South African companies and individuals as high-risk counterparties in global transactions. This development is entirely unacceptable, and it is incumbent upon our government to take immediate action to rectify this untenable position. We must restore confidence in our financial system and demonstrate to the international community that South Africa is a responsible and trustworthy partner in global trade.
The immediate effect of the greylisting is that South African clients will be subject to enhanced due diligence, which will increase the costs of doing business for South African companies and individuals trading internationally or holding bank accounts or investment accounts abroad. This will also complicate access to funding from non-profit organisations and multilateral development assistance.
Furthermore, South African banks will face increased costs in managing correspondent banking relationships and relationships with global infrastructure providers such as payment systems.
This will have significant implications for South Africa's economy, ranging from less than 1% to 3% reduction in GDP, depending on how quickly we can exit the greylist. Additionally, our reputation will suffer from the negative publicity from the greylisting. This will affect South Africa's international relationships in many ways, ultimately resulting in a reduced appetite for business relationships with South African associates.
The gravity of the situation requires that our top priority must be to take swift action to restore our reputation and regain the trust of the global community so that SA can exit the greylist as soon as possible. Government must take a comprehensive and collaborative approach to address the remaining concerns of FATF by taking coordinated action across departments and institutions - from the prosecuting authorities to the Hawks, the Financial Intelligence Centre, the Department of Home Affairs, police, SARS, and others.
Government must commit to rebuild institutional capacity, processes, and systems in key parts of the supervisory, investigation, and prosecution services,
The DA will put pressure on government to work closely with financial institutions and the security cluster to fulfil FATF's remaining recommendations and send a clear message that our country will not act as a conduit for illicit financial activities.
The DA is committed to restoring the integrity of our financial system and strengthening our position as a respected global player.
Issued by Dion George, DA Shadow Minister of Finance, 24 February 2023
