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Money laundering | Governor Kganyago flags huge implications of greylisting for SA economy

“We have got to treat this with urgency and demonstrate significant progress so that we can prevent greylisting.”

Dineo Faku Senior Reporter
SA Reserve Bank governor Lesetja Kganyago.
SA Reserve Bank governor Lesetja Kganyago.
Image: PUXLEY MAKGATHO

SA Reserve Bank governor Lesetja Kganyago says “hope is not a strategy” to prevent greylisting of SA's financial services sector.

He told MPs during a virtual meeting on finance on Wednesday greylisting would result in higher borrowing costs and the central bank and the Prudential Authority had implemented mechanisms to prevent it.

“We have got to treat this with urgency and demonstrate significant progress so we can prevent greylisting or, should we be greylisted, we will be able to come off that list within 12 months, and that is what happened with Mauritius and Zimbabwe and a number of other countries.”

The Financial Action Task Force (FATF) in October last year identified significant weaknesses in parts of SA’s anti-money laundering, counter financing of terrorism and counter financing of proliferation system and recommended strengthening of the entire system.

“Our concern is not just that FATF will impose this on us, but that other jurisdictions, such as the EU, which treat the FATF findings as a minimum, will step up their actions on SA-based institutions.

“What it will mean is that SA financial institutions and SA borrowers will be subjected to enhanced due diligence by the international financial institutions. When you have enhanced due diligence, those entities have to assess and ask, is it worth it? In which case they will increase the cost of borrowing to take into account the cost, or say it is not worth it, in which case they will not avail resources.”

The net result will be that SA will not have access to some capital.

“The implications for the economy are huge. The cost of borrowing will go higher.”

The country's risk premium had increased as the market had priced in the greylisting.

“The implications for the economy are going to come through access to international capital and the cost of accessing international capital. It is important, as SA, we treat this with the seriousness it deserves.”

TimesLIVE


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