Nigeria and South Africa on the radar over increased money laundering cases

The Financial Action Task Force (FATF), an intergovernmental organization that works to curb global money laundering and financial crime has placed South Africa and Nigeria under close scrutiny, following increased cases of money laundering.

The warning, also known as gray-listing, places the two countries under increased monitoring from the watchdog and other financial institutions, while they cooperate to address the concerns raised. Gray listing precedes blacklisting, which could lead to the imposing of economic penalties and other restrictive measures against blacklisted countries.

“When the FATF places a jurisdiction under increased monitoring, it means the country has committed to resolving swiftly the identified strategic deficiencies within agreed time frames,” the Paris-based agency said in a statement on its website. “The FATF does not call for the application of enhanced due diligence measures to be applied” to jurisdictions that have been added to the list, it said.

In 2019, an evaluation by the task force found that South Africa failed to meet all 11 effectiveness measures laid out to combat money laundering and financing of terrorism.

South Africa’s National treasury has indicated that will continue to work closely with FAFT in addressing the concerns raised.

Other setbacks associated with gray-listing include increased scrutiny by investors and financial institutions across the world. Additionally, clients from affected countries may be considered high-risk at many financial institutions, especially across the EU and the UK.

According to Quartz, “Gray listing is, basically, expected to spark a hike in the cost of doing business in the country, difficulties in sending money offshore as well as transacting with international banks and financial institutions. It comes with a decline in foreign direct investment, higher interest rates, and cost of access to capital.”

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Simon W Nderitu

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