South Africa’s FATF grey list exit marks key milestone but reform journey continues

South Africa’s removal from the Financial Action Task Force (FATF) grey list after nearly two years of intensive reform is being hailed as a milestone for the country’s financial sector—yet experts warn it marks the beginning, not the end, of deeper structural changes.

On Friday, the FATF announced that South Africa was among four African countries who had been delisted from its “grey list” of countries under increased monitoring for deficiencies in combating money laundering and terrorist financing.

South Africa was placed on the grey list in February 2023 after the FATF identified 22 shortcomings in the country’s anti-money laundering and counter-terrorist financing (AML/CFT) framework.

FATF, the global financial crime watchdog, had instructed the country to pursue money-laundering and terrorist financing in line with its risk profile, including by proactively seeking international cooperation, detecting and seizing illicit cash flows, and improving the availability of beneficial ownership information.

It said while South African authorities carry out some successful money laundering investigations, the proactive identification and investigation of laundering networks and professional enablers were not really occurring.

It also said authorities need to make better use of the financial intelligence products provided by South Africa’s financial intelligence unit, and improve the application of the risk-based approach by obligated entities and supervisors.

FATF President Elisa de Anda Madrazo on Friday said the decision to delist South Africa reflected the significant progress the country made in strengthening financial integrity and oversight.

“South Africa - sharpened tools to detect money laundering and terrorist financing in South Africa,” she said. 

The grey listing had carried serious economic repercussions. It damaged South Africa’s reputation, increasing the cost of borrowing, reducing foreign direct investment, and complicating cross-border transactions due to heightened due diligence requirements.

Kevin Lings, senior economist at Stanlib, agreed that being on the grey list also undermined investor sentiment and was an embarrassing position for the authorities, given that South Africa holds the Presidency of the G20 for 2025.

"Hopefully, the country’s exit from the grey list will provide a much-needed boost to investors (foreign and domestic), business and household confidence, helping to make 2026 a more prosperous year for the South African economy," Lings said.

The SA Revenue Services (Sars) said the FATF's initial grey listing was a consequence of systemic weaknesses aggravated during the era of State Capture.

Sars Commissioner Edward Kieswetter said the delisting is a vote of confidence in South Africa's progress, but it is not the end of vigilance.

"The fight against financial crime and corruption is a continuous one," Kieswetter said. "As we approach the new round of FATF review commencing in the latter part of 2026, Sars will work relentlessly to ensure that we do what is required to combat the illicit economy." 

Prof. Raymond Parsons, economist at North-West University Business School, said the delisting removes a key element of policy uncertainty and should boost business confidence.

“Removal from the grey list will therefore help to improve investor confidence and reduce the costs associated with overseas financial transactions,” Parsons said.

“By complying with global standards, it also demonstrates the progress that SA has made in dealing with money laundering and terror financing. It signals that, if the necessary effort and political will is effectively mobilised behind a key reform, it is possible to achieve positive outcomes quite rapidly.”

Operation Phumelela, South Africa’s Financial Sector Competitiveness Taskforce, concurred that the reforms undertaken have strengthened the financial system’s ability to detect and prevent corruption, financial crime and economic misconduct.

Leila Fourie, chairperson of Operation Phumelela and CEO of the JSE, emphasised that while celebrating this milestone, the exit from the grey list is not the end of the journey, but the beginning of a sustained commitment to maintaining and strengthening South Africa's AML/CTF systems.

"The improvements implemented are permanent fixtures of our financial architecture. We remain committed to working with the FATF global network and our regional partners to preserve and advance the integrity of both the South African and global financial systems," Fourie said.

South Africa’s removal from the grey list will help reduce transaction costs, enhance investor confidence, and improve the ease of doing business, particularly in the financial sector. 

The National Treasury said while exiting the grey list is an important milestone, “it is only start of a broader process to continue to strengthen key institutions.” 

BUSINESS REPORT