The anti-money laundering ‘grey-list’

The global anti-money laundering body has issued a warning due to deficiencies in the fight against organized crime and illicit finance, placing South Africa and Nigeria, the two largest economies in Africa, on notice. The Financial Action Task Force (FATF), based in Paris, announced on Friday that it had added South Africa and Nigeria to its “grey-list” of nations that needed to do more to strengthen their capacity to combat financial crime, putting them under closer scrutiny by investors and banks around the world.

A country’s perceived financial probity may be significantly impacted by FATF actions. As a result of major shortcomings in preventing money laundering and terrorist funding, the G7-instituted body has the authority to “blacklist” banking systems. Just Turkey and South Africa are G20 nations whose economies have been placed on the FATF’s “grey list.” Yemen, Albania, and the United Arab Emirates are more countries on the “grey list.” The nations on the blacklist are Iran, North Korea, Turkiye and Myanmar.

Nigeria’s grey-listing came a day before the presidential election.

Technically, the nations on the watchlist are not required to conduct more due diligence, but in practice, banks and investors frequently scrutinize affected transactions more closely, incurring expenses that the struggling economies of South Africa and Nigeria can ill-afford. In order to lessen the effects of the grey listing, South African banks have already said that their controls have been improved. The South African Treasury stated that the long-term costs of letting the flow of earnings from crime and corruption into South Africa’s economy would be significantly higher than the expenses of improved monitoring.

Last year, the African National Congress-affiliated government of President Cyril Ramaphosa rushed to implement laws to close loopholes noted by the FATF, but it has struggled to demonstrate significant advancements in the investigation and prosecution of organized crime and corruption scandals. The announcement of Nigeria’s inclusion on the grey list comes only one day before the country’s presidential and parliamentary elections, as well as after economic activity has been hampered by cash shortages brought on by anti-vote-buying laws.

South Africa has made progress to meet recommendations to improve laws.

According to the task group, South Africa has made tremendous strides toward implementing suggestions to strengthen laws and create better policies. It also stated that Nigeria had advanced. In response to the grey listing, South Africa’s central bank stated on Friday that it had a zero-tolerance policy when it came to the exploitation of the financial system by money launderers or financiers of terrorism. The majority of the problems that were found were remedied thanks to South Africa’s diligence within the 12-month observation period that was made available to it.

On the first anniversary of the invasion in Ukraine, the FATF also barred Russia from membership, imposing a major censure by an organization whose power extends beyond western financial systems. The oversight organization continued on by stating that Russia’s actions, such as indications of involvement in the arms trade and cybercrimes connected to the conflict, “unacceptably run opposite to the FATF core principles seeking to promote security, safety, and the integrity of the global financial system.” In this month’s Financial Times, Ukraine’s finance minister Serhiy Marchenko urged western countries to kick Russia out of the task force in order to “substantially raise the cost of doing business with Russia and effectively stifle Putin’s capacity to finance his illegal war of aggression.”

FATF leads global action to tackle money laundering.

Global efforts to combat money laundering, terrorism financing, and proliferation finance are led by the Financial Action Task Force (FATF). In order to reduce dangers, the FATF studies how money is laundered and how terrorism is supported, promotes international norms, and judges whether individual nations are acting effectively. FATF regularly keeps tabs on the sources, uses, and transfers of money used by criminals and terrorists. Criminals must find new ways to launder their dirty money as countries put strong controls in place to stop illicit financial flows. In order for nations and the private sector to take the required precautions to reduce these dangers, the Task Force must frequently release studies that increase the understanding of the most recent methods of financing terrorism, proliferation, and money laundering.

Related Link

FATF: Website

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