For the past two years, South Africa has been under the scrutiny of the global financial community, navigating the complexities of the Financial Action Task Force (FATF) greylist. Greylisting is more than just an administrative label – it signals vulnerabilities in a country’s financial safeguards, particularly in preventing money laundering and terror financing. It affects investor confidence, the ease of doing business, and the country’s overall financial reputation.
But South Africa is not standing still. With 20 of the 22 required action items now addressed or largely addressed – as of 21 February 2025, the country is on the brink of reclaiming its financial credibility. The FATF has stated that at this rate, South Africa will exit the greylist by October. The update from FATF acknowledges the country’s improvements, particularly in regulatory enforcement and transparency. This is no small feat: it reflects an intense period (over the past two years) of reform, collaboration, and commitment from financial institutions, regulators, and law enforcement agencies.
However, the road to full compliance is not over. The two key hurdles remaining are: proving a sustained increase in investigations and prosecutions of serious and complex money laundering cases and tackling the full range of terror financing activities. These challenges are not unique to South Africa; they are among the most demanding issues faced by any jurisdiction combating financial crime. Unlike legislative changes or structural reforms, which can be implemented through policy decisions, these final steps require consistent, measurable enforcement, real cases, real prosecutions, and real consequences for offenders.
In response to the FATF update, National Treasury expressed confidence in the efforts of financial regulators, law enforcement agencies, and beneficial ownership registries in meeting FATF’s requirements. A key takeaway from Treasury’s response is its commitment to a “prosecution-guided investigation strategy,” ensuring that cases are built in a way that meets FATF’s expectations for effectiveness and sustainability. The statement also reassures stakeholders that South Africa remains on track to exit the greylist by October 2025.
Why Does This Matter?
Beyond compliance with FATF, this process is about something much bigger – trust. Trust in South Africa’s financial system. Trust from global investors. Trust from businesses looking for a stable economic environment. Being greylisted creates barriers to international transactions, increases costs for South African businesses, and raises concerns about the country’s ability to police illicit financial activities effectively.
To restore this trust, South Africa must move from passive reform to active enforcement. Investigative bodies need to demonstrate not only that they are opening more cases but that those cases are leading to successful prosecutions. This means law enforcement agencies, prosecutors, and financial regulators must work in seamless coordination, ensuring that financial criminals, whether individuals, corporations, or networks face real consequences.
Lessons from The Philippines
The Philippines’ case, having recently exited the FATF greylist after being added in June 2021, serves as a reminder that when efforts are increasingly coordinated and geared towards a common-goal, progress can be made. The FATF said in a statement that the Philippines strengthened the effectiveness of its anti-money laundering and counter-terrorism financing regime to meet the commitments in its action plan regarding the strategic deficiencies that the FATF identified. It singled out President Ferdinand Marcos’ 2023 signing of an executive order targeting money laundering and “counter-terrorism financing” as having played a key role in the decision.
South Africa too can learn from the Philippines case, especially if it is to address the two remaining action items in order to exit the greylist.
What Will it Take to Exit the Greylist?
The timeline is clear: by June 2025, South Africa needs to demonstrate measurable progress on these two outstanding issues, paving the way for a potential delisting in October 2025. Achieving this requires a thorough and well-coordinated concerted effort:
Firstly, more resources must be allocated to law enforcement agencies to identify, track, and dismantle money laundering networks. This includes prosecuting high-profile offenders, not just small-scale financial crimes. Secondly, the South African Reserve Bank, National Prosecuting Authority (NPA), Hawks, and the Financial Intelligence Centre (FIC) must operate in lockstep. A fragmented approach will not suffice as financial crimes often cross multiple sectors and demand a unified national response. Lastly, it is not enough to show temporary progress for FATF’s next review. South Africa must prove that these improvements will last, demonstrating that financial crime enforcement is a long-term priority, not just a short-term obligation.
Beyond the Greylist: A Stronger South Africa
In the words of the BLSA’s CEO Busi Mavuso, the danger lies in staying on the grey list for a longer period as the negative effects on trade and foreign investment will increase impacting SA’s already very weak levels of economic growth and high levels of unemployment. As a result, the country’s ability to demonstrate real, consistent enforcement will be crucial in the next reporting cycle. By strengthening its ability to fight financial crime, South Africa can protect its economy from illicit flows, enhances investor confidence, and builds a more transparent business environment. A 2023 OECD report estimated that between $3.5 and $5 billion in illicit financial flows leave South Africa each year. As the SARS Commissioner recently argued, plugging this hole can boost the country’s revenue and protect South Africans from tax increases.
The Role of the Informal Economy in the FATF Greylisting Debate
While South Africa’s progress toward exiting the FATF greylist is commendable, the discussion around financial integrity must also consider the country’s significant informal economy. Informal trading has always been a part of South Africa’s economy, contributing almost 7% to the GDP and providing livelihoods for millions of South Africans, particularly in street trading, employment creation, small-scale manufacturing, and unregistered businesses. With this in mind, informal traders should be viewed as an “important part of government’s strategies to address unemployment, support livelihood creation and reduce vulnerability.
However, the very nature of informal trade, operating outside formal regulatory frameworks, raises critical challenges in financial transparency, creates money laundering risks, and access to the banking system. This is because efforts to strengthen anti-money laundering and counter-terrorism financing measures often come with unintended consequences, particularly for economies with a high reliance on informal trade. The tightening of banking regulations and compliance measures required by FATF could lead to the further exclusion of informal businesses from the formal financial system.
Many informal traders already struggle with limited access to credit, banking services and heightened due diligence requirements may make financial institutions reluctant to engage with small-scale, unregistered enterprises. This risk is not unique to South Africa. Nigeria, which was greylisted in February 2023, faces similar challenges, where a large informal economy and cash-based transactions complicate compliance with international financial regulations. If FATF standards are applied without considering local economic realities, the unintended outcome may be greater financial exclusion, potentially driving more transactions underground rather than improving oversight.
Rather than a one-size-fits-all enforcement approach, South Africa can pursue strategies that enhance financial inclusion while maintaining regulatory integrity. One potential model is through the Township-Based Economic legislation that seeks to formalise and support township-based businesses through better financial integration, regulatory frameworks, and education on the benefits of formal economic participation. In South Africa, the closest equivalent to a Township-Based Economic legislation is the Gauteng Township Economic Development Act, which aims to promote inclusive economic growth within townships by facilitating easier access for township residents to participate in the economy.
By linking FATF compliance efforts to initiatives that encourage gradual formalisation, South Africa can create a more inclusive financial system that reduces illicit flows without marginalising small businesses. The government, in partnership with financial institutions and policymakers, must find ways to strengthen oversight without stifling economic participation.
Ultimately, the decisions made in the next few months will determine whether South Africa cements itself as a trusted financial player or continues to battle the reputational challenges of greylisting. The progress made so far shows that an exit is within reach, only if the country delivers on its final commitments. The journey is nearly complete. Now is the time to cross the finish line.