Focus keyphrase:
- Delisting decision expected at October FATF plenary
- Four African nations cited for reform progress
- Exit could boost investor confidence and flows
NIGERIA and South Africa may be removed from the Financial Action Task Force’s (FATF) ‘grey list’ as soon as October, a development seen as a turning point for two of Africa’s largest economies, Bloomberg reported yesterday.
The Paris-based watchdog recently sent assessors on-site to review progress on reforms. According to people familiar with the matter, both countries — along with Burkina Faso and Mozambique — have made significant strides in strengthening measures against illicit financial flows.
Progress hailed by governments
A Nigerian government spokesman, Temitope Ajayi, said removal from the list would mark ‘a culmination of the remarkable work the government is doing in fulfilling our global obligations and making Nigeria more attractive to investors’.
South Africa’s National Treasury said it would comment only after FATF’s formal decision but pointed to a July statement in which it noted that the country had substantially completed all 22 action points required for delisting.
Mozambique has also completed its 26 required actions, according to Luís Abel Cezerilo, the national coordinator for its FATF process. He told Bloomberg the outcome would be crucial as the country prepares for the resumption of TotalEnergies’ $20bn natural gas project.
Burkina Faso has implemented 37 measures needed to exit the list, Madi Tapsoba of the Inter-Governmental Action Group against Money Laundering in West Africa said.
October decision expected
All four African countries are expected to be delisted on October 24, the closing day of the FATF plenary in Paris. However, the decision will require consensus among members, which include the US, UK, European Commission, China, Japan and India.
Analysts say removal from the list would help sentiment. ‘It would be confirmation that the reforms and measures put in place in the wake of the gray listing are both significant and sticky,’ said Lauren van Biljon, senior portfolio manager at Allspring Global Investments UK Ltd. She added that while direct market impact may be limited, a short-term boost in asset prices was possible.
Grey list burden
South Africa and Nigeria were placed on the grey list in February 2023 for shortcomings in anti-money laundering controls. The designation requires countries to be more closely monitored and can cast doubt on the integrity of financial systems.
A 2021 International Monetary Fund study found that countries placed under FATF scrutiny experienced a significant reduction in capital inflows. Investors and multilateral lenders often factor the FATF’s recommendations into their decisions.
Shifts in FATF policy
The FATF, led by Mexican official Elisa de Anda Madrazo, has recently adjusted its approach to grey listing. Wealthier member states are now subject to greater scrutiny, while less-developed nations are considered lower risk to the global financial system.
Beyond setting anti-money laundering standards, the FATF also researches emerging challenges, including the regulation of virtual assets and threats such as sextortion, Bloomberg noted.
If confirmed later this month, the delisting of Nigeria, South Africa, Burkina Faso and Mozambique would remove a major obstacle to investor confidence in their financial systems and provide a boost for Africa’s two biggest economies.
