Has South Africa done enough to avoid grey-listing?

South Africa faces a critical juncture as the looming cloud of potential grey-listing status hangs over the country's financial sector. Grey-listing is a serious concern for countries, indicating weak financial controls against money laundering, terrorist financing, and the funding of weapons for war. The repercussions could be detrimental to South Africa's economy, impacting areas such as foreign investment, funding sources, and overall economic stability. To shed light on whether South Africa has taken adequate steps to steer clear of grey-listing, Kerin Wood, Risk and Response Leader at PwC South Africa, shared valuable insights in a recent interview with CNBC Africa. Wood acknowledged the significant progress made in legislative changes to address anti-money laundering and terrorist financing. While commendable, there are concerns about the effectiveness of these measures and the need for continuous improvement. The rapid pace of regulatory reforms in response to FATF guidelines is noteworthy, but the focus now shifts to enforcement and demonstrating the productivity of the current regime through criminal actions against offenders. One of the key areas of vulnerability highlighted by FATF is the lack of significant prosecutions in financial crimes, a factor that could influence South Africa's grey-listing status. Wood emphasized the importance of enhancing regulatory enforcement and adopting a risk-based approach to regulatory oversight to strengthen the country's anti-money laundering framework. The potential economic impact of grey-listing is a matter of apprehension, with global counterparts likely to view South Africa as a high-risk jurisdiction. This perception could lead to reduced foreign investment, funding challenges, and reputational damage, affecting key economic indicators like inflation and GDP. Wood underscored the need for proactive measures to minimize the duration of grey-listing and mitigate its adverse effects. Addressing the uncertainties surrounding the likelihood of grey-listing, Wood acknowledged the efforts made thus far to reduce the probability but refrained from quantifying the chances. The challenge lies in anticipating the duration of grey-listing if South Africa fails to meet the required standards. Comparisons were drawn to Mauritius' two-year struggle to be removed from the grey list, with projections indicating potential impacts of up to 3% of GDP if grey-listing persists beyond a two-year timeframe. In summary, South Africa's fate regarding grey-listing hangs in the balance, with Wood highlighting the importance of sustained efforts to enhance the anti-money laundering framework and regulatory enforcement. While optimistic about the country's prospects, the need for vigilance and decisive action remains paramount in safeguarding South Africa's financial integrity and economic stability.