What does greylisting mean for the average South African?

What does greylisting mean for the average South African? Image: Supplied

What does greylisting mean for the average South African?

South Africa has been officially “greylisted”. Sable International explains what this means and what the impact might be for South Africans who intend to transfer or invest funds offshore.

What does greylisting mean for the average South African?

What does greylisting mean for the average South African? Image: Supplied

Global money laundering and terrorist financing watchdog, the Financial Action Task Force (FATF) has placed South Africa on its list of “jurisdictions under increased monitoring”, commonly known as the “grey list”. 

South Africa joins countries such as the Cayman Islands, Nigeria, Panama, and Syria in being deemed to have strategic deficiencies in their anti-money laundering and counter-terrorist financing (AML/CFT) regimes. 

The impact of South Africa’s greylisting

Greylisting will add to the compliance requirements and responsibilities of financial services companies in South Africa, probably resulting in additional costs in ensuring compliance and possibly adding delays to executing and completing any transactions.

Time will tell whether there is a direct impact on South Africans’ ability to invest offshore, but we suspect that greylisting will not prevent anyone’s ability to invest directly offshore. However, it may require extra due diligence in determining proof of source of funds being transferred (e.g. sale of property, sale of shares, company dividends, loan accounts and trust distributions) and FICA/KYC (Know Your Client) on clients, particularly in the countries to which the funds are being transferred. Furthermore, for South African entities (companies and trusts in particular), there will be the added FICA responsibility of knowing the ultimate beneficial owners of the entity in question. 

As South Africa is seen as a high-risk investment destination, some investors may not be allowed to invest in the country anymore. This would have an immediate impact as there may be capital flows out of South Africa.

However, South Africa is a large exporter of raw materials and the world will continue to need these going forward. The country also has a highly regarded financial sector that is unlikely to be materially impacted by the FATF’s decision.

Can South Africa be removed from the grey list?

South Africa had been under review by the FATF since 2017 and, in 2019, the FATF identified several areas in which South Africa’s AML/CFT regime needed improvement. 

South Africa had 67 areas noted in the June 2021 evaluation report from the FATF, including improving the transparency of beneficial ownership information, enhancing the supervision of designated non-financial businesses and professions, and strengthening the country’s ability to investigate and prosecute money laundering and terrorist financing offences. 

It has implemented measures to address 52 of them. The country has until January 2025 to address the remaining 15 areas.

If South Africa addresses the outstanding areas, it could be removed from the FATF grey list as early as 2024. 

South African foreign investment allowances

South Africa being greylisted is another one of a host of reasons to diversify internationally to limit your exposure to the uncertain investment environment that South Africa represents. 

The investment allowances available to South Africans wishing to invest or move funds offshore remain the same as before, namely:

Sable International has over 25 years of experience with foreign exchange. Their team of exchange control specialists can take the stress out of the tax clearance process, and everything related to transferring your funds offshore, making sure you get the most out of your Rands. Get in touch on +27 (0) 21 657 2153 or saforex@sableinternational.com.