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Just more than a year ago the Financial Action Task Force (FATF) released its Mutual Evaluation Report on SA’s anti-money-laundering and counter-terrorist financing measures. We scored poorly, with several deficiencies that would require us to make significant changes to meet FATF recommendations by April 2023, or risk being added to its greylist.
Pakistan and Mauritius offer recent case studies of the effect the FATF greylist might have on a country’s local economy. Pakistan paid dearly for it, being on the FATF greylist from 2008-2009, 2012-2015 and again from 2019. Pakistan-based economic consultancy Tabadlab recently gauged the economic effects of that greylisting and found it increased scepticism towards the economy’s outlook, which led to a decline in local investment, exports and inward foreign direct investment (FDI). By Tabadlab’s estimate the economy had to forgo $38bn in GDP between 2008 and 2019, including $4.5bn in lost trade and $3.6bn in forgone FDI.
Looking at how Mauritius managed its grey time may offer us insight into what will need to be done to improve our own FATF outlook. Mauritius got off the list quickly, and is now largely or fully compliant with 39 of the 40 FATF recommendations. This approach has been complemented by a comprehensive risk-based supervision framework that now monitors financial institutions and designated nonfinancial businesses, such as real estate brokers and jewellery stores. The country has significantly improved the process of detecting threats of fraud, prosecuting criminals and confiscating illegal proceeds.
SA’s economic activity depends on the integrity and effective functioning of its financial system, especially when it comes to foreign investors buying local assets such as government bonds as well as shares on local stock exchanges. A collective loss of confidence will be the greatest threat facing our local economy if we are to be greylisted by the FATF.
Michael de la Hunt Cofounder and fund manager, Ion Capital Partners
JOIN THE DISCUSSION: Send us an email with your comments to letters@businesslive.co.za. Letters of more than 300 words will be edited for length. Anonymous correspondence will not be published. Writers should include a daytime telephone number.
Support our award-winning journalism. The Premium package (digital only) is R30 for the first month and thereafter you pay R129 p/m now ad-free for all subscribers.
LETTER: Greylisting hits confidence
Just more than a year ago the Financial Action Task Force (FATF) released its Mutual Evaluation Report on SA’s anti-money-laundering and counter-terrorist financing measures. We scored poorly, with several deficiencies that would require us to make significant changes to meet FATF recommendations by April 2023, or risk being added to its greylist.
Pakistan and Mauritius offer recent case studies of the effect the FATF greylist might have on a country’s local economy. Pakistan paid dearly for it, being on the FATF greylist from 2008-2009, 2012-2015 and again from 2019. Pakistan-based economic consultancy Tabadlab recently gauged the economic effects of that greylisting and found it increased scepticism towards the economy’s outlook, which led to a decline in local investment, exports and inward foreign direct investment (FDI). By Tabadlab’s estimate the economy had to forgo $38bn in GDP between 2008 and 2019, including $4.5bn in lost trade and $3.6bn in forgone FDI.
Looking at how Mauritius managed its grey time may offer us insight into what will need to be done to improve our own FATF outlook. Mauritius got off the list quickly, and is now largely or fully compliant with 39 of the 40 FATF recommendations. This approach has been complemented by a comprehensive risk-based supervision framework that now monitors financial institutions and designated nonfinancial businesses, such as real estate brokers and jewellery stores. The country has significantly improved the process of detecting threats of fraud, prosecuting criminals and confiscating illegal proceeds.
SA’s economic activity depends on the integrity and effective functioning of its financial system, especially when it comes to foreign investors buying local assets such as government bonds as well as shares on local stock exchanges. A collective loss of confidence will be the greatest threat facing our local economy if we are to be greylisted by the FATF.
Michael de la Hunt
Cofounder and fund manager, Ion Capital Partners
JOIN THE DISCUSSION: Send us an email with your comments to letters@businesslive.co.za. Letters of more than 300 words will be edited for length. Anonymous correspondence will not be published. Writers should include a daytime telephone number.
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