South Africa’s Removal from Anti-Money Laundering Watchlist Warrants Unilateral U.S. Action

South Africa has an illicit finance problem, and despite what an international monitoring group says, it’s far from over. On October 24, the Financial Action Task Force (FATF) — the intergovernmental anti-money laundering and counter illicit finance watchdog — determined the country no longer warrants increased monitoring.

FATF added South Africa to its “grey list” in February 2023 due to deficiencies in its efforts to fight money laundering and terrorist financing. Despite its recent removal from the list, South Africa remains mired in corruption scandals, serves as a hub for terrorist fundraising, and lacks either the capacity or the will to investigate and prosecute complex financial crimes. What South Africa needs is greater pressure to make meaningful reforms, not less.

South Africa’s Inadequate Prosecution of Complex Money Laundering Cases

Despite FATF’s claim that South Africa has made sufficient progress to merit delisting, its enforcement record leaves much to be desired. The country has a poor track record of investigating complex money laundering and corruption cases, and it hasn’t proven effective in combating terrorist financiers either.

South Africa is widely viewed as the financial gateway to Africa. It maintains a robust banking sector, yet the systemic corruption and money laundering risks identified in the Zondo Commission reports of 2023 remain largely intact. Of the nearly 100 African National Congress (ANC) party members implicated for corruption and abuse of power, including those in parliament, none have faced meaningful prosecution. Moreover, according to Open Secrets, a leading South African anti-corruption watchdog, “No high-profile politician or corporation has been successfully prosecuted.” Terror finance-related prosecutions have been limited as well.

Ongoing Corruption Scandals Expose South Africa’s Present-Day Deficiencies

South Africa risks being re-added to the grey list if FATF determines Pretoria warrants renewed monitoring. The consensus-based body, of which the United States is a member, will conduct another evaluation beginning in early 2026 and running through October 2027.

As the Banking Association of South Africa recently noted, South Africa’s removal from the grey list comes “at a time when confidence in the country’s law enforcement is being challenged by evidence being presented at parliamentary hearings and the Madlanga Commission of Enquiry into allegations of criminality, political interference, and corruption in the criminal justice system.” Testimony before the Madlanga Commission suggests South Africa is in a period of police capture, with law enforcement agencies co-opted by criminal syndicates actively preventing investigations from proceeding. The inquiry specifically relates to allegations of kickbacks and the shuttering of a political killings taskforce by recently dismissed former Police Minister Senzo Mchunu. What’s more, nearly 150 municipal employees have been assassinated in South Africa since 2018, alongside five prosecutors over the past five years.

FATF’s Standards Fall Short of U.S. National Security Objectives

FATF supports U.S. efforts to combat money laundering, corruption, and terror finance abroad. But its standards do not always align with broader U.S. national security objectives. While Hamas and Hezbollah are designated by the United States as terrorist organizations, FATF’s multinational framework does not require countries to adopt similar designations. This gap helps explain why individuals such as Ebrahim Gabriels — who leads Al Quds Foundation South Africa, the local branch of a U.S.-designated Hamas affiliate — have been able to operate freely. The same applies to Hezbollah financier Nazem Ahmad and his South Africa-based network of companies.

Countries like South Africa that fail to designate Hamas and Hezbollah as terrorist organizations serve as conduits for terror financing. The United States should therefore consider developing and unilaterally applying a new designation for jurisdictions of terror-financing concern when they facilitate fundraising by these groups. This would create a natural pathway for more serious bilateral engagement between Washington and Pretoria to ensure South Africa’s domestic terrorism laws align with U.S. national security and foreign policy objectives.

Separately, Washington should press FATF during South Africa’s next evaluation period to ensure the country’s paper reforms yield real convictions in complex money laundering and corruption cases.

Max Meizlish is a senior research analyst for the Center on Economic and Financial Power (CEFP) at the Foundation for Defense of Democracies (FDD). For more analysis from Max and CEFP, please subscribe HERE. Follow Max on X @maxmeizlish. Follow FDD on X @FDD and @FDD_CEFP. FDD is a Washington, DC-based, nonpartisan research institute focusing on national security and foreign policy.