The main implication of grey listing is that members of the international community are "warned" that conducting business with the impugned country could facilitate terrorism financing and money laundering.
The implications of grey listing for South Africa are two-fold: reputational and economic. South Africa now has a negative reputation in the global economy. It may also be downgraded by credit rating agencies, which would affect the country's ability to borrow on the international capital markets.
Regulators in the US, EU, and the UK might place restrictions on their banks regarding transacting with South African banks. Some international financial institutions have policies that prevent them from doing business with grey listed countries or at least, limit the scope of business that can be conducted. Such restrictions will further impede business and foreign investment.
Financial institutions that rely heavily on global trade in their treasury departments will be heavily impacted. Trading offshore will come with higher due diligence hoops to jump through and more red tape. Trading revenue is therefore going to decline. The South African insurance industry will particularly be impacted.
The FATF has identified eight areas that South Africa needs to focus on, which include improving South Africa's risk-based supervision of identified risks. South Africa is also required to improve their investigation and prosecution of serious and complex money laundering and terrorist financing activities. Competent authorities are also required to ensure that they have accurate and up-to-date beneficial ownership information.
It is important to note that, as Mauritius has shown, South Africa can come off the grey list within as little as two years if government and the private sector co-operate to take decisive actions to address the FATF’s concerns. Government is clearly committed to these actions. Finance Minister Enoch Godongwana, in his Budget speech on 22 February, said the outstanding deficiencies would be addressed through regulations and the eight actions summarised above. South Africa has a plan of action, it is now about implementation.