South Africa Faces Crucial FATF Onsite Review in Bid to Exit Greylist

South Africa stands on the brink of a decisive juncture as the Financial Action Task Force (FATF) Africa Joint Group conducts its onsite inspection in July 2025. This review represents the final hurdle in a nearly three-year journey triggered by South Africa’s inclusion on the FATF greylist in February 2023. Whether the country secures removal from the list hinges not only on the reforms it has introduced, but critically on whether those reforms have translated into meaningful, demonstrable effectiveness in curbing money laundering and terrorist financing.

The implications of greylisting for a G20 nation like South Africa have extended far beyond reputational damage. It has brought about increased transaction costs, placed strain on international banking relationships, and dampened foreign investment sentiment. Since its greylisting, South Africa has raced to address 22 specific action items issued by the FATF, each designed to tighten its anti-money laundering and counter financing of terrorism (AML/CFT) framework through clear, measurable improvements.

This July’s assessment by the Africa Joint Group will directly inform the FATF Plenary in October 2025, where the final decision on whether to delist South Africa will be made. The review carries immense weight not just for government and regulators, but also for the financial sector, global investors, and cross-border partners.

Following its 2021 Mutual Evaluation Report, the FATF flagged several major shortcomings in South Africa’s AML/CFT infrastructure. Chief among these were weak investigations and prosecutions of complex money laundering offenses, poor access to beneficial ownership data, and ineffective efforts to seize or freeze illicit assets. These deficiencies led to the country’s placement on the greylist, or what FATF terms “increased monitoring.”

Greylisting galvanized South Africa into launching an aggressive reform agenda. Parliament revised the Financial Intelligence Centre Act (FICA), along with related laws, to better align with international AML/CFT standards. These amendments expanded the scope of accountable institutions, fortified risk-based supervision, and strengthened the Financial Intelligence Centre’s authority. The Hawks and the National Prosecuting Authority (NPA) were allocated greater resources to enhance their financial crime units. Additionally, the Companies and Intellectual Property Commission (CIPC) was tasked with implementing a beneficial ownership registry to meet global transparency benchmarks.

These initiatives pushed South Africa to “largely compliant” status on most of the FATF’s 40 Recommendations. Suspicious transaction reports (STRs) increased substantially, and regulators issued new guidance clarifying due diligence expectations, record-keeping obligations, and risk management for high-risk clients.

Still, by the time of FATF’s 2023 follow-up review, two central concerns remained unresolved. One was the lack of sustained increases in prosecutions for money laundering, particularly in complex and serious cases. The other was South Africa’s inconsistent record in tracing, freezing, and confiscating criminal assets—both key indicators of effective financial crime enforcement.

The Africa Joint Group’s onsite review marks the final and most consequential phase of this process. This time, the emphasis is not on laws or regulations themselves, but on their real-world application. FATF will examine whether South Africa’s reforms are achieving the intended outcomes.

During the two-day assessment, FATF representatives are expected to meet with officials from key institutions, including the Financial Intelligence Centre, the Hawks, the NPA, the South African Reserve Bank, and financial sector regulators. They will request concrete evidence showing that South Africa has increased investigations and prosecutions related to money laundering and terrorist financing, particularly for complex cases. They will also look for proof of successful asset tracing and confiscation, especially in high-value or cross-border matters. Additionally, FATF will evaluate the effectiveness of information-sharing among law enforcement, the timeliness and accuracy of beneficial ownership data, and the level of cooperation between private-sector financial institutions and authorities.

Importantly, FATF evaluators will scrutinize whether progress is systemic and sustainable, not merely the product of temporary political will or short-term initiatives. “Sustainable progress” is a key FATF benchmark—meaning enforcement must result from institutional capacity-building and long-term procedural upgrades, rather than reactionary enforcement driven by the urgency of inspection.

If the Africa Joint Group concludes that these requirements have been met, it will recommend South Africa for removal from the greylist in the October 2025 FATF Plenary. The implications of this determination are profound.

Remaining on the greylist poses ongoing challenges for the country. Local firms have experienced increased difficulty in accessing global financial services. Major banks and corporations have encountered repeated demands for enhanced due diligence from their foreign partners. Some institutions have even been unable to open correspondent accounts or transact in major currencies like the US dollar due to perceived risk exposure linked to South Africa’s greylisting.

Greylisting has also sparked a transformation in domestic compliance culture. Many businesses have ramped up investment in transaction monitoring systems, employee training, and data analytics. Regulatory bodies and industry groups have issued waves of new guidance, contributing to a notable uplift in compliance standards across the private sector.

Still, South Africa must contend with enduring problems. Predicate offenses such as corruption, illicit trade in gold and tobacco, tax evasion, and environmental crimes remain widespread. Criminal networks often exploit shell companies and informal money transfer systems. Law enforcement agencies, despite increased funding, face capacity constraints, skills shortages, and challenges in coordinating internationally.

To make its reforms permanent, South Africa will need to institutionalize them. The country must ensure that AML/CFT efforts are fully embedded within the day-to-day operations of both government and private-sector actors. This means ongoing investment in forensic accounting, asset recovery, and digital evidence capabilities. It also requires improving collaboration between the Financial Intelligence Centre, regulators, and law enforcement through strong data-sharing protocols.

Maintaining accurate, accessible, and up-to-date beneficial ownership records is another priority, as is integrating those systems with global transparency efforts. South Africa must also continue engaging with designated non-financial businesses and professions (DNFBPs) to ensure that risk-based compliance measures are practical and proportionate.

The application of advanced technology will be a key enabler. By harnessing artificial intelligence and machine learning, institutions can detect suspicious transaction patterns faster and with greater accuracy. Automating compliance checks and proactively identifying threats will help prevent a regression to old vulnerabilities once FATF attention subsides.

This FATF inspection is a make-or-break moment for South Africa’s financial crime strategy and its global standing. A successful outcome will signal that the country has developed not just robust laws, but effective enforcement to back them up—laying the groundwork for increased investment, restored credibility, and enhanced financial stability.

Failure to convince FATF of genuine progress, however, risks prolonged reputational harm and a continued drag on economic growth. As the Africa Joint Group weighs South Africa’s future, the outcome will reflect not just recent reforms, but the country’s long-term commitment to transparency, accountability, and institutional resilience in the fight against financial crime.

By fLEXI tEAM