Delisting should, over time, ease cross-border deals and lower counterparty risk. Trustees and fund managers must stay alert, strengthen oversight of service providers, and keep a sharp eye on markets.
By Vernon Wessels
South Africa’s removal from the Financial Action Task Force (FATF) greylist is unambiguously good news for the savings industry. It removes a reputational cloud that has lingered for nearly three years and should, over time, make cross-border investing simpler and cheaper. But it’s just the start.
The FATF’s next round of assessments will test whether the rules work in practice. For pension fund boards and asset managers, the message is clear: consolidate the gains – don’t relax the standards.
Lifting the greylisting signals a “material strengthening” of South Africa’s anti-money laundering and terrorist financing regime, Era Gunning, executive for banking and finance at ENSafrica.
Gunning says for financial institutions, this should result in smoother global transactions, more predictable cross-border flows and less red tape. As confidence returns, this should lead to lower borrowing costs as perceptions of “sovereign and counterparty risk” ease.
Still, she cautions against complacency. “Delisting is not an endpoint, and the next assessment will emphasise outcomes over form,” Gunning adds. “Supervisors and evaluators will test whether frameworks deliver measurable results.”
Should the country slip backwards, this would dent confidence, even if FATF doesn’t take any formal action.
Don’t expect fireworks in markets, though.
Izak Odendaal, chief investment strategist at Symmetry, Old Mutual’s multi-manager investment business, says the change was “largely expected” – rather like the way markets shifted after South Africa was first greylisted in February 2023.
“If you’re a pension fund, it’s not as though your members are suddenly better or worse off than before,” he tellsToday’s Trustee.
The bigger change is operational. During greylisting, opening or maintaining relationships with foreign managers and global custodians meant extra paperwork, longer know-your-customer (KYC) cycles and even occasional rejections – including for large, reputable institutions.
“There was definitely friction in cross-border transactions,” Odendaal says. With the delisting, those bureaucratic hurdles should ease, especially when appointing new offshore managers or opening new accounts.
Still, he says, foreign banks will continue to apply risk-based due diligence to South African institutions. “The pressure is simply more proportionate now,” he says.
No slacking off
ENSafrica’s Gunning has a clear message for trustees: “Delisting is positive for the ecosystem, but trustees should treat it as a consolidation phase, not a relaxation of standards.”
In practice, that means trustees should tighten their governance and show that reforms are being embedded at every level. They can do this by:
- Updating risk models — refreshing country and counterparty risk scores based on evidence, not headlines, and recording the rationale in board minutes.
- Interrogating service providers — obtaining updated confirmations from administrators, managers and custodians that reforms have been implemented, including the use of beneficial-ownership data.
- Tightening oversight of opaque assets — whether for private-market vehicles or cross-border mandates, trustees ought to request independent testing of monitoring and sanctions controls.
- Upgrading contracts by including right-to-audit clauses, anti-money laundering indicators, and setting incident-reporting timelines.
- Refreshing training — updating the fund’s risk assessment models and training trustees and senior staff on new requirements, including exposure to virtual-asset service providers (VASPs), or crypto-related entities.
- Remembering the golden rule, that outsourcing compliance doesn’t outsource fiduciary responsibility.
Gunning highlights four immediate priorities.
First, embed the reforms prioritising beneficial ownership data; second, expect deeper testing, especially as it relates to terrorist financing; third, recalibrate risk settings, but don’t over-correct by instituting blanket restrictions that harm clients unnecessarily; and fourth, document everything by keeping clear audit trails.
Odendaal cautions against reading too much into South Africa’s removal from the greylist.
“We shouldn’t overplay it – it’s not a silver bullet,” he says. Much of this year’s market momentum has been driven by global factors, such as the gold price, interest rate expectations, and US policy shifts under President Donald Trump.
Nonetheless, he says, there is still a sense among international investors that South Africa is “gradually moving in the right direction”.
Even before this move, Symmetry was overweight South African bonds and equities due to their relatively low valuations.
“If inflation trends toward the Reserve Bank’s lower target (of 3%), a roughly 9% 10-year yield remains attractive on a five-year hold basis,” he says. “But don’t expect another 15% in 12 months – that would be unrealistic”.
Sunnier prospects
For trustees and chief investment officers, there are a number of other factors that may be more critical in assessing the country’s investment prospects.
First, there has to be real progress on Operation Vulindlela, President Cyril Ramaphosa’s economic reform plan, particularly in electricity, ports, and logistics. This will ultimately matter more for returns than any compliance milestone, like the greylisting.
Second, a firmer inflation-targeting stance could anchor expectations and extend the rally in South African bonds. And stable trade relations with the US would help lower the risk that premium global investors now attach to South Africa.
Of course, getting off the greylist was a vital step. But as South Africa’s money-laundering oversight body, the Financial Intelligence Centre (FIC), has made clear, the focus now is performance, not paperwork.
That means better-quality suspicious-transaction reports that feed into real investigations, quick access to verified beneficial-ownership data, and consistent, risk-based supervision of banks and non-financial businesses, such as law firms and estate agents.
If issues arise, fix them fast, document the response and show that the controls work. The next FATF evaluation, which begins next year and has its report due in October 2027, will focus on producing evidence.
In the final analysis, South Africa’s removal from the greylist will lower costs and smooth operations, but the real prize is deeper trust with global counterparties. That will only hold if boards treat this not as a moment to exhale, but as a mandate to embed effectiveness.
As Gunning puts it: “Delisting is positive – now prove it every day.”
