What our FATF exit teaches us about effective reform - BLSA

THE announcement last week that South Africa has successfully exited the Financial Action Task Force grey list is cause for genuine celebration.

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More importantly, it offers critical lessons about what works when we get serious about reform.

When grey listing was a serious risk already in 2022, BLSA commissioned research showing the economic impact could range from under 1% of GDP if we reacted fast and credibly, to 3% of GDP if we were slow and unwilling to meet FATF standards. We warned that the reputational damage would be significant, including enhanced due diligence requirements for all transactions between South Africans and the rest of the world, potential loss of foreign banking relationships, and reduced appetite for investment.

The good news is that we have managed to keep the impact to the bottom end of that estimate, thanks to our determined and credible effort over the last 32 months in which we have successfully addressed all 22 action items that were set out by FATF and earned our way off the list. This is no small feat, particularly given that several of these items required demonstrating sustained improvements over multiple reporting periods and genuine effectiveness, not just rules being changed but actually enforced.

The FATF exit demonstrates something we often forget in South Africa: when we combine political will, technical competence and sustained focus, we can deliver world-class results.

Several factors were critical to this success:

First, there was clear accountability. National Treasury chaired an interdepartmental committee that coordinated the process, reported regularly to cabinet, and maintained laser focus on the action plan. The FATF is a peer-based mechanism, so we knew who was going to judge us and how we needed to satisfy their requirements. There is a clear gameplan because other countries are affected if South Africa's institutions are captured by money launderers and terrorist financiers.