South Africa could face capital outflows in the months ahead and lower investment returns after a Paris-based anti-money laundering watchdog placed the country on its watchlist.
On Friday, the Financial Action Task Force (FATF) put SA on its grey list.
“New jurisdictions subject to increased monitoring are SA and Nigeria,” the FATF said in a statement on its website.
Last year, Futuregrowth Asset Management said once the FAFT put SA on its grey list, it would impact capital flows. An International Monetary Fund study estimated potential capital outflows of 7.6% of GDP based on the historical incidence of grey-listed countries, according to Futuregrowth.
The FATF’s decision could increase compliance costs for banks and asset managers. The news of the greylisting caused the rand to weaken against the US dollar to 18.48 on Friday, from Thursday’s close of 18.21.
National Treasury said Minister of Finance Enoch Godongwana informed FATF president Raja Kumar that the South African cabinet would address all outstanding deficiencies.
“Government recognises that addressing the action items will be in the interest of SA, and that doing so is consistent with our commitment to rebuilding the institutions weakened during the period to state capture, the effectiveness of which is essential to addressing crime and corruption,” said the treasury.
The Financial Sector Conduct Authority and the South African Reserve Bank issued statements on Friday affirming their tough stances against money laundering and terrorist financing. – Staff Reporter
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