JOHANNESBURG/PARIS, Feb 24 (Reuters) – International financial crime watchdog the Financial Action Task Force (FATF) on Friday added South Africa to its “grey list” of countries under special scrutiny to implement standards to prevent money laundering and terrorism financing.
Being added to the list is a reputational setback for the Africa’s most advanced economy, which has been trying to address shortcomings identified by the FATF.
The rand ZAR=D3 extended losses against the dollar after the watchdog’s decision was announced to trade down about 1% on the day.
Analysts say increased FATF monitoring could mean South African clients at international financial institutions will be subject to enhanced due diligence checks. It could also complicate South African attempts to access funding and support from multilateral development institutions and official lenders.
South Africa’s central bank and National Treasury said in separate statements that they noted the watchdog’s decision and would work to address its concerns.
The Treasury said it expected a limited impact from the grey-listing on financial stability and the costs of doing business with South Africa.
“The costs of increased monitoring will be substantially lower than the long-term costs of allowing South Africa’s economy to be contaminated by the flows of proceeds of crime and corruption,” it said.
The Paris-based FATF also added Nigeria, Africa’s biggest economy, to its grey-list on Friday.
It said both South Africa and Nigeria had made high-level political commitments to address the deficiencies it had found.
(Reporting by Tassilo Hummel in Paris, Bhargav Acharya, Nellie Peyton and Alexander Winning JohannesburgEditing by Ingrid Melander, James Macharia Chege, Tomasz Janowski and Louise Heavens)
