South Africa Added to FATF 'Grey List' Due to Lack of Crypto Regulation

South Africa Added to FATF 'Grey List' Due to Lack of Crypto Regulation

The Financial Action Task Force, an international financial watchdog, declared on February 24 that it had added South Africa to its “grey list,” which was seen as a significant setback for the country.

The Financial Action Task Force (FATF), a global organization that monitors financial crimes, has added South Africa to its list of nations “committed to resolving swiftly the identified strategic deficiencies within agreed timeframes.” A report claims that South Africa's inclusion on the FATF's 'grey list' is a significant reputational setback for the nation, which has been eager to avoid being included. News reported that the Financial Action Task Force (FATF) was worried about the lack of regulation in the crypto and digital asset industry. As a result, a regulator of the financial industry in South Africa decided to classify cryptocurrency as a financial product. Some experts believed that this decision would prevent South Africa from being put on a grey list, but this turned out to be incorrect.

However, the South African Reserve Bank (SARB) appeared to acknowledge that the nation has not taken enough steps to prevent being placed on the grey list in its statement from February 24. Despite this, the bank promised to “intensify its supervision and further improve the deterrent and proportionality of administrative sanctions issued.”

South African Reserve Bank (SARB) Statement
South African Reserve Bank (SARB) Statement

Potential Effects on Capital Flow

The SARB also stated that banks and other financial institutions must play a part in addressing the flaws found by the FATF.

“The SARB expects banks and other financial institutions within its purview to comply fully with all their obligations and applies a high standard of supervision that is necessary to safeguard and protect the integrity of the financial system. These actions, when coupled with measures and actions undertaken by law enforcement and other authorities within South Africa, serve to achieve an effective AML/CFT/CPF system,” the central bank said.

According to Reuters, being on the FATF's grey list could make it difficult for South Africa to secure loans from foreign banks alarmed by the watchdog's decision. The report also cites a 2021 International Monetary Fund document that suggests that countries on this list occasionally see the flow of capital into their respective economies disrupted.

South Africa Added to FATF 'Grey List' Due to Lack of Crypto Regulation

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