The removal of both South Africa and Nigeria from the Financial Action Task Force (FATF) greylist marks a significant turning point for the reputation of African finance.
The big-guns are joined by Burkina Faso and Mozambique and their removal indicates no small step in the maturing African compliance ecosystem. But there is the other side of the coin: almost half of the countries around the world who remain on the greylist are African.
This list includes some important continental economies: Kenya, the Democratic Republic of the Congo, Angola, Côte d’Ivoire, Algeria, Cameroon, Namibia, and South Sudan.
Why, you may ask, does it matter? An inter-governmental body, the FATF (founded in 1989) sets standards and promotes the implementation of legal and operational measures to combat money-laundering, terrorist-financing and the financing of weapons of mass destruction. Countries with strategic deficiencies are generally placed under “increased monitoring” (the greylist) or, in more extreme cases, are labelled “high risk” and find their way onto the blacklist.
High-level commitments
Although eight African countries remain on the greylist, in all cases the FAFT organisation says they have made “a high-level political commitment to work with the FATF”. Its statement about why they remain there is brief and technical.
For example, FAFT says Angola should continue to work with it to implement an action plan by, among others, “(1) enhancing its understanding of money laundering/terrorist financing risks; (2) improving risk-based supervision of non-financial banking entities; (3) ensuring competent authorities have adequate, accurate and timely access to beneficial ownership information.”
The statement goes on to say that Angola needs to demonstrate “an increase in investigations and prosecutions”, as well as an “effective process to implement targeted financial sanctions without delay”.
Comments on the other countries are very similar and suggest a long road ahead before some countries get off the list.
No surprise then that the countries that have been taken off the list are delighted. Nigeria’s minister of finance and coordinating minister of the economy, Wale Edun, told Reuters the delisting was “a decisive signal to investors that Nigeria is open, compliant, and ready for deeper financial integration”.
The decision follows two years of intensive reforms and inter-agency collaboration to address deficiencies in Nigeria’s anti-money laundering and counter-terrorism financing frameworks.
Likewise, in South Africa, the Treasury said in a statement: “South Africa’s progress in addressing … deficiencies and exiting the FATF greylist represents a major policy and institutional achievement for the people of South Africa, particularly following the weakening of key law-enforcement and other institutions during the state capture era.”
And their delight is well-founded: being on the greylist imposes real costs in the form of higher risk premiums, correspondent banking difficulties, and trade finance frictions. The exit, therefore, eases the pain of cross-border finance and should boost investor confidence. It also puts African countries on the path of institutional reform.
But it’s worth noting that FAFT itself is shifting from an “adopt anti-money laundering laws” stance to one of wanting to see a “sustained increase in prosecutions.” Both Nigeria and South Africa have plenty of work to do.
Top image: Rawpixel/Currency collage
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Another rigged list you get off by imposing restrictions on your own population. Why is the USA not there when their “Super PACs” clearly engage in money laundering activities that put any of the African countries to shame?