South African Reserve Bank (Sarb) governor Lesetja Kganyago says while South Africa’s placement on the Financial Action Task Force (FATF) greylist did not immediately impact correspondence between local banks and foreign institutions, the need to exit the list remains urgent for the economy.
Kganyago was addressing the bank's 104th AGM in Pretoria on Tuesday. The FATF placed South Africa on its greylist last year, citing weaknesses in the country’s safeguards against money laundering and terror financing.
He said risks to the economic outlook included geopolitical tensions, sticky inflation, elevated government debt levels globally and unprecedented elections around the world throughout the year, leading to uncertainty and market volatility.
“South Africa is confronted with its government’s growing debt levels and ever-higher debt servicing costs as well as domestic financial institutions’ high exposure to the debt. The Sarb continues to monitor this sovereign financial sector nexus closely.”
He said the FATF greylisting increased requirements on financial institutions and other institutions, referred to as Designated Non-Financial Businesses and Professions or DNFBPs, to account for their internal controls aimed at ensuring they do not facilitate the flow of funds from money laundering or for terror financing.
“Though we are working hard to exit the FATF greylist, the effects of being greylisted are being felt as foreign counterparties apply greater scrutiny to our domestic institutions.”
Reserve Bank governor warns of greylisting long-term impact on economy
Image: Freddy Mavunda
South African Reserve Bank (Sarb) governor Lesetja Kganyago says while South Africa’s placement on the Financial Action Task Force (FATF) greylist did not immediately impact correspondence between local banks and foreign institutions, the need to exit the list remains urgent for the economy.
Kganyago was addressing the bank's 104th AGM in Pretoria on Tuesday. The FATF placed South Africa on its greylist last year, citing weaknesses in the country’s safeguards against money laundering and terror financing.
He said risks to the economic outlook included geopolitical tensions, sticky inflation, elevated government debt levels globally and unprecedented elections around the world throughout the year, leading to uncertainty and market volatility.
“South Africa is confronted with its government’s growing debt levels and ever-higher debt servicing costs as well as domestic financial institutions’ high exposure to the debt. The Sarb continues to monitor this sovereign financial sector nexus closely.”
He said the FATF greylisting increased requirements on financial institutions and other institutions, referred to as Designated Non-Financial Businesses and Professions or DNFBPs, to account for their internal controls aimed at ensuring they do not facilitate the flow of funds from money laundering or for terror financing.
“Though we are working hard to exit the FATF greylist, the effects of being greylisted are being felt as foreign counterparties apply greater scrutiny to our domestic institutions.”
Sanctions pending, FIC warns as it blames tardy law firms, estate agents for delay in greylist exit
Kganyago said the Sarb was playing its part in ensuring South Africa is able to exit the greylist as it waits for its next two reporting cycles in September and January next year, when South Africa will provide the FATF with updates on its action plan.
“The Prudential Authority (PA) and the financial surveillance department are driving the Sarb’s efforts to get South Africa off the greylist. The FATF has identified 22 action items that South Africa must address to improve its anti-money laundering and combat the financing of terrorism regimes.”
He reminded shareholders that of the 22 action items, eight have been largely addressed while 14 remain in progress.
He said the Sarb PA found the correspondent banking relationships between local banks and foreign institutions remained sound, but the greylisting needed to be addressed urgently.
“Though foreign counterparties have been applying greater scrutiny for our domestic institutions as a result of the FATF greylisting, the PA has found no immediate negative impact on correspondent banking relationships. It is nevertheless imperative that the action items are addressed timeously to avoid long-term negative impacts on the economy.”
He said recent winter storms also highlighted the impact that risks presented by climate change posed for South Africa and the world.
Business Times
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