SA, Nigeria set to exit dirty-money list

South Africa and Nigeria are poised to exit a global financial watchdog’s “grey list” as soon as next month, marking a change in fortune for two of the continent’s biggest economies.

The two nations were put under heightened scrutiny by the Financial Action Task Force in February 2023 for shortcomings in tackling illicit financial flows.

Assessors from the Paris-based FATF conducted on-site visits in recent weeks and subsequent feedback on the action plans for those countries, as well as for Burkina Faso and Mozambique, noted significant progress, according to people familiar with the matter who asked not to be identified as the deliberations are private.

All four countries are expected to come off the list on October 24, the final day of an FATF plenary in the French capital, the people said. No final decisions have been made.

Listings are determined based on a consensus among the group’s membership, which includes the US, UK, European Commission, China, Japan and India.

South Africa and Nigeria exiting the list “would certainly be good for sentiment,” said Lauren van Biljon, senior portfolio manager at Allspring Global Investments UK.

“It would be confirmation that the reforms and measures put in place in the wake of the grey listing are both significant and sticky,” she said. The direct market impact may be fairly modest, though a short-term lift in asset prices is possible, Van Biljon said.

The watchdog’s recommendations are closely tracked by global investors who are wary of conducting business in places found to be deficient in anti-money laundering regulations.

Jurisdictions added to the list require closer monitoring, and the designation might cast serious doubt over the integrity of their financial systems.

A 2021 report by the International Monetary Fund found grey-listed countries experienced “a large and statistically significant reduction in capital inflows.” — Bloomberg