On February 24, Bloomberg reported that South Africa was put by the Financial Action Task Force (FATF) on a grey list of countries that have a low level of control over illicit financial flows.
Last year, South Africa received an unsatisfactory rating because of the improper functioning of the system for combating financial crime and corruption. According to experts, the reason for this non-compliance with FATF standards was a long period of bribery in the country under President Jacob Zuma. Since the disclosure of FATF warning recommendations the Government of South Africa tried to prevent the country from being put on the grey list and to this end amended several laws, including the relevant expansion of regulatory procedures. However, the implementation of the above measures failed, and as a result of the February plenary session South Africa was put on the FATF gray list.
Markets reacted instantly to the news. Following the announcement of the FATF decision, the rand fell by as much as 1.5% against the dollar and stocks of banks listed on the Johannesburg Stock Exchange (JSE) fell by more than 2%. As of this writing, the USD/ZAR currency pair is down 0.21%. The South African Reserve Bank (SARB) and the South African Ministry of Finance have in turn announced that they will increase monitoring of the financial industry to prevent corruption.
What consequences await South Africa because of this case? According to analysts, it will severely damage the reputation of South Africa, which could lead to further capital outflows and higher borrowing costs. In addition, such consequences would lead to a weakening of the rand and a strong rise in the country's inflation and interest rates. At the very least, if the situation deteriorates further, South Africa could find itself on a par with Syria, the DRC and South Sudan, which are on the blacklist.
Last year, South Africa received an unsatisfactory rating because of the improper functioning of the system for combating financial crime and corruption. According to experts, the reason for this non-compliance with FATF standards was a long period of bribery in the country under President Jacob Zuma. Since the disclosure of FATF warning recommendations the Government of South Africa tried to prevent the country from being put on the grey list and to this end amended several laws, including the relevant expansion of regulatory procedures. However, the implementation of the above measures failed, and as a result of the February plenary session South Africa was put on the FATF gray list.
Markets reacted instantly to the news. Following the announcement of the FATF decision, the rand fell by as much as 1.5% against the dollar and stocks of banks listed on the Johannesburg Stock Exchange (JSE) fell by more than 2%. As of this writing, the USD/ZAR currency pair is down 0.21%. The South African Reserve Bank (SARB) and the South African Ministry of Finance have in turn announced that they will increase monitoring of the financial industry to prevent corruption.
What consequences await South Africa because of this case? According to analysts, it will severely damage the reputation of South Africa, which could lead to further capital outflows and higher borrowing costs. In addition, such consequences would lead to a weakening of the rand and a strong rise in the country's inflation and interest rates. At the very least, if the situation deteriorates further, South Africa could find itself on a par with Syria, the DRC and South Sudan, which are on the blacklist.