South Africa is edging closer to shaking off its grey-listed status, having met 20 of the 22 requirements set by the Financial Action Task Force (FATF). National Treasury is optimistic the final two hurdles will be cleared by June, paving the way for the country’s removal from the global watchdog’s list. But as momentum builds, officials are warning that exiting the grey list is just the beginning.
Ismail Momoniat (pictured), the head of National Treasury’s FATF delegation, outlined the country’s progress at the FSCA Conference in Sandton on 19 March. South Africa was grey-listed in February 2023 for deficiencies in its anti-money laundering and counter-terrorism financing (AML/CFT) regime.
Following the grey-listing, the FATF presented South Africa with an Action Plan, identifying 22 action items linked to eight strategic deficiencies. The financial sector was directly responsible for three of these. These included upgrades of both I03/4 financial section action items in February 2025.
- I03/4(1): The authorities should proactively identify and act against unlicensed cross-border money or value transfer services MVTS.
- I03/4(4): South Africa should demonstrate that all AML/CFT supervisors (SARB, Prudential Authority, FinSurv, FSCA and Financial Intelligence Centre) apply and monitor the implementation of follow-up remedial actions and that effective, proportionate and dissuasive sanctions are being applied.
- I03/4(3) South Africa should strengthen the AML/CFT supervisory capacity (human and financial resources) of the FSCA and the FIC.
All these, and most of the other items, are now largely addressed, Momoniat said.
By February, only two outstanding actions remained. According to the Action Plan, South Africa must still:
- “South Africa should demonstrate a sustained increase in investigations and prosecutions of serious and complex money laundering, in particular involving professional money laundering networks/enablers and third-party ML in line with its risk profile.”
- “South Africa should demonstrate a sustained increase in the effective identification, investigation and prosecution of the full range of TF activities, consistent with its TF risk profile.”
Read: SA won’t get off the grey list in June – Treasury now aiming for October
The country now needs to show the FATF that its AML/CFT improvements are not only effective but consistent over multiple reporting periods.
Momoniat said National Treasury had submitted a draft report and will present to the FATF in Tanzania in April.
“And hopefully, those will be addressed. And if, if that’s the case, then FATF in June will authorise an on-site visit [in September].”
FATF assessors will visit to confirm that South Africa has made sustained improvements on all 22 action items.
“It won’t be a heavy audit, but just to make sure that we weren’t lying when we reported, that we spoke the truth, which we have.”
The private sector will also be consulted during the visit.
Momoniat underscored that all departments and entities must continue to demonstrate progress from one reporting cycle to the next, even after South Africa exits the grey list. The government is planning more outreach ahead of the on-site visit.
If the FATF is satisfied, South Africa could be removed from the grey list by October.
So, what’s next?
“The bigger question will be, what does South Africa do beyond grey-listing? How can we sustain and strengthen the improvements that you’ve seen,” Momoniat told delegates.
His key message to the financial sector: do not become complacent. “The regulators have to continue to improve and strengthen their systems.”
That’s critical, he noted, because the next mutual evaluation review by the FATF is scheduled for 2026.
“So, we better be ready. You don’t want to be grey-listed again.”
Momoniat explained that the mutual evaluation review comprises two parts: first, the legal framework, which assesses the letter of the law through the FATF’s 40 recommendations (or standards) on AML/CFT. This includes a technical compliance review of how adequate a country’s laws and frameworks are.
The second part focuses on effectiveness – how well a country applies and enforces its laws.
Momoniat said South Africa has made significant headway on technical compliance. In the 2021 mutual evaluation report, it was found wanting on 20 of the 40 FATF recommendations. Since then, two major pieces of legislation – the General Laws Amendment Act and the Protection of Constitutional Democracy Against Terrorist and Related Activities Act Amendment Act – have helped plug most of the gaps.
By October 2024, FATF accepted that South Africa had addressed 18 of the 20 deficiencies (with one no longer applicable). Only two remain: Recommendation 8 (non-profit organisations) and Recommendation 32 (cash couriers), where South Africa is still deemed “partially compliant”.
Momoniat said the upcoming mutual evaluation will focus on recommendations where changes have occurred since 2019, and any areas South Africa requests to be re-assessed to improve its ratings.
“We will be introducing an Omnibus Bill later this year to strengthen our legal framework for the mutual evaluation,” he said.
Momoniat said the key challenge ahead of South Africa’s next mutual evaluation is how the country will address all 11 immediate outcome effectiveness measures required by the FATF. He noted that updating the National Risk Assessment (NRA) is critical, because it forms the basis for the risk-based approach underpinning the FATF standards and is a central focus of any mutual evaluation.
“We need to significantly update our National Risk Assessment for money laundering and also prepare one for proliferation finance,” he said.
He noted that, in addition to the financial sector, several other areas will require greater focus. These include crypto assets, both cross-border and domestic transactions, and ensuring that South Africa’s regulatory framework is modernised to address new payment systems, particularly those operating through apps and other IT-based platforms.
Momoniat emphasised the importance of addressing MVTS and crypto-related activities, as well as strengthening oversight of designated non-financial businesses and professions (DNFBPs), such as estate agents, legal practitioners, auditors, accountants, and dealers in precious metals and stones.
“Many are not licensed or even registered – how do you ensure compliance?”
Challenges facing the financial sector
Wrapping up, Momoniat noted several challenges facing the financial sector from the FSCA’s perspective.
He said a key question is how to ensure that financial institutions treat customers more fairly.
“I think there’s still a lot to be done. I know it’s not only to do with money laundering. It goes beyond that,” he remarked.
Momoniat also pointed to the need to improve access within the existing system for all licensed financial institutions. He raised concerns about exclusion and affordability, saying, “Aside from some people not having access, the level of fees – bank fees, retirement costs and fees, insurance industry costs.”
He emphasised that the industry must also focus on how to bring those currently outside the financial system into it.
“Poor households, migrants, even those that may not be here legally; they need access to the financial system. I know some of our laws don’t allow that, but we really need to bring people in and not drive them to even more illegality.”
Momoniat further called for better regulation of emerging technologies, such as non-bank financial services, payment products, digital wallets, and platforms operated by companies such as Uber, Google, and Apple.
He added that strengthening the Regulation of Interception of Communications and Provision of Communication-Related Information Act (RICA) is another priority to enhance financial inclusion through mobile devices.
“We need to fix the gaps in the RICA system, because you can’t really place reliance on cellphones on who the owner is. And to the extent that we can fix up the gaps, it will also enable that we can rely more on cellphones, which is already the case.”
Momoniat warned that while new opportunities are emerging, they bring additional risks.
“And the old risks haven’t gone away.”
