South Africa Faces Renewed FATF Greylisting Risk as Anti-Corruption Reforms Stall

South Africa Faces Renewed FATF Greylisting Risk as Anti-Corruption Reforms Stall

South Africa’s progress on structural reforms is showing a sharp contrast: improvements in electricity and freight logistics have lifted the country’s overall reform score to a record high, while anti-corruption efforts remain stuck. Business Leadership South Africa (BLSA) has warned that persistent weaknesses in financial-crime enforcement could put the country at risk of returning to the Financial Action Task Force (FATF) grey list during its next assessment cycle.

BLSA’s fifth quarterly Reform Tracker review, covering July to September 2026, raised the overall completion index to 72.5, up from 71.3 in the previous quarter. However, the corruption reform score remained unchanged at 51.2, with no measurable progress recorded in that area during the quarter. The tracker’s findings were released on October 28. "BLSA’s official statement" (https://blsa.org.za/media-statements/media-statement-blsa-reform-tracker-records-highest-score-since-monitoring-began/) describes the overall result as the highest since tracking began in March 2024.

A stronger overall score masks gaps in governance

The latest results indicate that reform progress is uneven rather than uniformly weak. Electricity reform improved from 67.8 to 69.4, while freight logistics rose from 69.6 to 72.5. Financial-sector reforms also advanced, with the category score increasing from 88.1 to 89.5.

Governance moved in the opposite direction, declining from 55.0 to 54.6. BLSA linked the fall partly to a Constitutional Court ruling that declared the Public Procurement Act unconstitutional and invalid because Parliament had not facilitated meaningful public participation at the National Council of Provinces stage. The ruling created a need for legislative action to address the defect.

The criminal-justice category edged up from 84.2 to 84.5, but progress was limited. The Criminal Procedure Bill was the only deliverable reported to have advanced in that category, moving from 50 to 55 following the publication of discussion papers.

The stalled corruption score is particularly important because it relates to the effectiveness of institutions responsible for investigating and prosecuting serious financial crime. BLSA’s warning is not that every anti-corruption measure has failed, but that the pace of progress remains inadequate in areas relevant to the country’s international assessment.

Why the FATF assessment matters

The FATF is an international standard-setting body that evaluates how effectively jurisdictions combat money laundering, terrorist financing and related financial threats. Its grey list—formally called “Jurisdictions under Increased Monitoring”—identifies jurisdictions working with the organisation to address strategic deficiencies in their systems.

South Africa was added to the list in February 2023. Following a programme of reforms and an assessment process, the FATF removed the country from increased monitoring on 24 October 2025. The decision followed work to address 22 action items in an agreed action plan. The FATF’s "official announcement" (https://www.fatf-gafi.org/en/publications/Fatfgeneral/outcomes-FATF-plenary-october-2025.html) confirmed the removal.

Leaving the list was a significant regulatory milestone, but it did not mean that all risks had disappeared. The next evaluation will examine whether improvements are being sustained and whether South Africa’s institutions can demonstrate effective results in practice.

According to BLSA’s latest assessment, the new mutual evaluation process is expected to run through October 2027, with a peer review anticipated in the first quarter of 2027. The assessment will place particular importance on whether the country has maintained progress in investigating and prosecuting money-laundering networks.

BLSA has highlighted several continuing concerns: the investigation of organised crime, successful prosecution of financial offences and the recovery of assets linked to criminal activity. Ismail Momoniat, who helped lead South Africa’s campaign to exit the grey list, has also warned of the risk of reversal. The concern is that formal reforms will not be enough if law-enforcement bodies cannot show that they are producing effective outcomes.

Potential consequences for banks and businesses

A return to the FATF grey list would not automatically prohibit South African companies from trading internationally or mean that every transaction would face new restrictions. However, it could prompt foreign financial institutions and business partners to reassess their exposure to the country and apply additional risk controls where appropriate.

For banks, exporters and firms making cross-border payments, increased scrutiny could translate into more documentation, longer compliance checks or higher transaction costs in some relationships. The impact would depend on individual institutions, counterparties, transaction types and the responses of international regulators and banks.

Investor confidence is another consideration. Uncertainty over anti-money laundering enforcement can complicate due diligence for investors and lenders assessing exposure to South African businesses. If the country were relisted, some institutions could factor the additional compliance burden into their decisions. But the scale of any effect on foreign direct investment, borrowing costs or capital flows cannot be reliably quantified from the tracker alone.

The broader reform picture is relevant here. Improvements in electricity and freight logistics could support business activity by easing infrastructure constraints. Yet gains in those areas may be undermined if governance and financial-crime risks remain unresolved. Investors typically consider a combination of economic performance, institutional credibility and regulatory predictability rather than a single reform score.

What to watch before 2027

South Africa’s next challenge is to turn the reforms that enabled its 2025 exit into demonstrably sustainable enforcement. Relevant indicators include progress in complex financial-crime investigations, prosecutions of money-laundering networks, the recovery of criminal proceeds and the operational capacity of law-enforcement institutions.

The government and enforcement agencies will also need to show that weaknesses are being addressed consistently, not only through new laws or policy commitments. Public reporting on outcomes and continued engagement with the FATF will help establish whether the country is maintaining the required momentum.

For now, renewed greylisting remains a risk warning rather than a confirmed outcome. BLSA’s latest tracker shows that South Africa can make measurable progress in key economic reforms while still facing serious governance and enforcement challenges. Whether the country avoids a return to increased monitoring will depend on the effectiveness and durability of its anti-money laundering and anti-corruption systems as the 2027 assessment approaches.