Why South Africa Should Still Be on the FATF Grey List: Policies on Paper, Peril in Practice

In a move hailed by government officials and business leaders as a milestone for economic recovery, South Africa was officially removed from the Financial Action Task Force’s (FATF) “Grey List” on October 24, 2025, after nearly three years of heightened international scrutiny.

The delisting, announced during the FATF’s plenary session in Paris, signals that the country has sufficiently addressed strategic deficiencies in its anti-money laundering and counter-terrorism financing (AML/CFT) frameworks—issues that first landed it on the list in February 2023 amid the lingering shadows of state capture. Finance Minister Enoch Godongwana called it a “testament to our collective resolve,” while the South African Revenue Service (SARS) emphasized reforms that bolstered oversight and transparency.

Yet, as the rand strengthened modestly against the dollar in the immediate aftermath, serious questions linger about the substance behind the symbolism. South Africa’s Grey List exit comes against a stark backdrop of entrenched corruption, where trillions of rands in public funds have vanished into the pockets of politically connected elites, and recent scandals reveal a financial oversight system more porous than fortified.

While policymakers tout enhanced regulations under the Financial Intelligence Centre Act (FICA), the reality on the ground paints a picture of dismal implementation: commissions of inquiry unearth systemic rot in police and procurement, auditors flag normalized graft, and asset forfeiture raids expose luxury lifestyles funded by unchecked illicit flows.

South Africa, far from graduating to the “white list” of compliant nations, arguably deserves to remain under the Grey List’s watchful eye, lest the removal prove a premature pat on the back that emboldens rather than eradicates financial crime.

A Brief History: From Grey Shadows to Questionable Dawn

The FATF, the global watchdog on money laundering and terrorist financing, maintains what is referred to as a “Grey List” of jurisdictions under “increased monitoring” due to deficiencies that could facilitate illicit financial flows. Placement on the list isn’t punitive but a call to action: countries must enact and demonstrate an “action plan” of reforms within tight deadlines, or face reputational and economic hits like higher compliance costs for banks and investor wariness.

South Africa’s tumble onto the list in 2023 was no surprise. It stemmed from vulnerabilities exposed by the Zondo Commission, formally the Judicial Commission of Inquiry into Allegations of State Capture, which laid bare how networks of corruption during Jacob Zuma’s presidency siphoned billions from state coffers through rigged tenders and shadowy dealings with foreign entities like the Gupta family. The FATF pinpointed 22 action items, including bolstering supervision of financial institutions, improving risk assessments for non-profits vulnerable to terror funding, and enhancing transparency around beneficial ownership of companies to unmask hidden money trails.

Over the ensuing years, under President Cyril Ramaphosa’s administration, South Africa scrambled to comply. Key strides included amending FICA to tighten reporting on politically exposed persons (PEPs), ramping up SARS audits, and establishing a national risk assessment for money laundering.

Progress Made on Paper

By mid-2025, on-site visits from FATF technical teams verified progress, leading to the delisting alongside nations like Nigeria, Mozambique, and Burkina Faso. Proponents argue these changes have fortified defences against criminal and terrorist funds, with the Banking Association South Africa (BASA) celebrating boosted investor confidence.

But compliance on paper doesn’t equate to efficacy in practice. The Grey List’s removal overlooks a deeper malaise: a criminal justice system riddled with interference, procurement pipelines leaking like sieves, and accountability mechanisms that bark without biting. As we’ll explore, ongoing exposés suggest illicit funds aren’t just slipping through cracks—they’re gushing.

Persistent Financial Irregularities: Scandals That Defy Reform

If the FATF’s action plan was a blueprint for plugging leaks, recent commissions and probes reveal how quickly the ink fades. South Africa’s financial irregularities aren’t relics of the Zondo era; they’re a living epidemic, with politically linked graft inflating costs and starving essential services.

The Zondo Legacy: Trillions in State Capture’s Wake

The Zondo Commission’s six-volume report, finalized in 2022 but with ramifications echoing into 2025, stands as a damning indictment of institutionalized corruption. It documented how state-owned enterprises (SOEs) like Eskom and Transnet were hollowed out by “state capture”, a web of influence peddling that funnelled an estimated R500 billion (over $27 billion) to private interests, though advocacy groups like Corruption Watch, peg the total loot closer to trillions when factoring in opportunity costs and economic drag. Testimonies revealed ministers and executives greenlighting tenders worth billions to cronies, often laundered through offshore accounts that FATF reforms were meant to expose.

Fast-forward to 2025, and Zondo’s warnings remain prophetic. Recovery efforts have netted a paltry R11 billion in stolen assets, per recent National Prosecuting Authority (NPA) disclosures. A mere drop in the ocean against the trillions evaded. Calls for a “corruption tax” on complicit firms highlights the private sector’s embroiled status, yet few prosecutions have followed, allowing criminal networks to regroup. In this context, FATF’s nod to improved PEP oversight rings hollow when Zondo alumni like former ministers continue to wield influence unchecked.

Tembisa Hospital: Procurement’s Poison Pill

No scandal better illustrates the gap between regulatory rhetoric and real-world rot than the Tembisa Hospital saga. In September 2025, the Special Investigating Unit (SIU) released an interim report exposing how syndicates misappropriated over R2 billion from this Gauteng public facility between 2019 and 2023. Funds that were meant for ventilators and beds during the COVID-19 peak and not for feathering elites lavish lifestyles. Officials colluded with suppliers to inflate invoices for undelivered goods, pocketing kickbacks in a modus operandi eerily reminiscent of state capture.

The SIU identified three major syndicates, with probes ongoing into similar fleecing at Durban’s King Edward VIII Hospital. Corruption Watch decried the “culture of fraud and racketeering,” urging asset freezes and prosecutions. Yet as of late October, only preliminary arrests have materialised.

How did FICA’s vaunted transaction monitoring fail to flag these billions in suspicious flows? The hospital’s CEO, who allegedly approved phantom payments, drove luxury vehicles seized in related raids, hinting at broader AML blind spots.

Madlanga Commission: Corruption in the Halls of Justice

Launched in September 2025, the Madlanga Commission—chaired by Supreme Court of Appeals Judge Mbuyiseli Madlanga, has been tasked to probe criminality, political interference, and corruption within South Africa’s police and legal structures. Its first hearings in Pretoria featured KwaZulu-Natal Police Commissioner Nhlanhla Mkhwanazi testifying to how “powerful criminal groups” had infiltrated law enforcement, compromising investigations into high-level graft.

Early findings echo Zondo’s almost forgotten findings: Widespread political meddling stalls criminal probes, with officers tipping off suspects or burying evidence for bribes. A parallel Parliamentary Ad Hoc Committee has flagged “systemic failures” in detective units, labeling task teams as mere stopgaps for a crumbling criminal justice edifice.

In a nation where illegal funds from drug cartels and extortion rackets fuel urban violence, Madlanga’s revelations question whether FATF’s terror-financing fixes can succeed when the enforcers themselves are for sale.

These irregularities aren’t isolated; they’re symptomatic of a financial ecosystem where criminal proceeds, estimated at R100 billion annually by the Institute for Security Studies, circulate freely, often through high-end purchases that should trigger FICA alerts but don’t.

The Accountability Abyss: Red Flags Ignored, Reforms Unenforced

Even as policies proliferate, their implementation falters in an absolute accountability vacuum. Auditor-General Tsakani Maluleke’s September 2025 address to Parliament was a clarion call: “Lack of accountability has normalised corruption as part of life in South Africa,” she warned, citing irregular expenditure ballooning to R70 billion across municipalities and SOEs in the 2024/25 fiscal year. Her office’s reports detail fruitless spending of a horrendous R60 billion in the prior year alone, fuelled by non-competitive tenders and unprosecuted malfeasance.

The National Anti-Corruption Advisory Council’s 2025 final report amplifies this, highlighting procurement fraud, nepotistic hiring, and medical claims scams that erode healthcare access for the vulnerable. Yet, follow-through is feeble, with a mere 5% of flagged irregularities leading to convictions, as per civil society trackers.

Asset forfeiture operations underline the ongoing farce. In October 2025, the SIU preserved R900 million in ultra-luxury vehicles, jewelry, and properties linked to Tembisa syndicates. Assets bought with laundered loot that evaded dealer reporting under FICA. Similarly, Hawks raids froze R2.7 million in cars tied to a North West municipal CFO’s fraud, and a nationwide sweep seized R52.6 million in homes and wheels from graft suspects.

These high-profile hauls, while laudable, arrive years late, after funds have multiplied unchecked. Why did luxury dealerships and estate agents—mandated reporters—miss the red flags on PEPs flashing untraceable cash?

The disconnect is clear: enhanced policies exist, but enforcement is scarce due to under-resourced agencies, judicial backlogs, police corruption, and political shield. FATF’s delisting credits “strategic deficiencies” addressed, yet ignores this operational chasm. As Maluleke noted, without accountability, reforms are “window dressing.”

The Big Question: What Evidence Convinced the FATF?

South Africa’s Grey List removal is a diplomatic win, but at what cost to credibility? Amid commissions unmasking trillions in pilfered wealth, auditors decrying normalized graft, and seizures revealing luxury funded by shadows, the delisting feels like rewarding intent over impact. Policies may gleam on statutes, but implementation’s dismal failure demands scrutiny, not celebration.

So, what concrete evidence—beyond polished reports and untested audits, could possibly have persuaded the FATF that South Africa is truly equipped to stem the tide of criminal and terrorist funds, when the nation’s own probes scream otherwise?