Rand strengthens as FATF lifts grey-list status

South Africa’s removal from the Financial Action Task Force (FATF) grey list on 24 October 2025 marks a significant reputational victory for the country’s financial system and governance architecture. The exit follows an 18-month remediation campaign led by the National Treasury, the South African Reserve Bank (SARB), and the Financial Intelligence Centre (FIC), which implemented sweeping legislative and supervisory reforms to address earlier deficiencies in beneficial-ownership disclosure, sanctions enforcement, and non-profit oversight.

The FATF had placed South Africa on its increased-monitoring list in February 2023, citing gaps in prosecution rates and inter-agency coordination. Since then, the authorities passed amendments to the Financial Intelligence Centre Act and Companies Act, tightened trust-register transparency, and improved cross-border data exchange. These reforms were validated through on-site inspections earlier this year, paving the way for Pretoria’s delisting.

Financial markets responded swiftly. The rand (ZARUSD) appreciated to around R17.89 per dollar, supported by renewed inflows and portfolio-hedging unwinds. The JSE Top 40 index (JSETOP40) advanced 0.6 percent on the day, extending gains amid expectations of lower external-funding premia for banks and corporates. Analysts said the delisting removes a psychological overhang that had constrained sentiment despite resilient macro fundamentals.

Banking executives expect compliance costs to decline gradually as correspondent banks recalibrate risk models. “We anticipate smoother dollar settlements and fewer secondary screening delays,” one Johannesburg-based treasurer said. Before delisting, cross-border transactions faced extra scrutiny that lengthened processing times and discouraged offshore participation in rand debt auctions.

The grey-list exit also enhances South Africa’s sovereign perception within multilateral credit frameworks. The IMF and World Bank had both highlighted the FATF status as a non-quantitative governance risk variable affecting loan conditionalities. The new compliance standing could therefore support cheaper capital inflows and higher participation in local-currency bond programmes.

At the policy level, SARB Governor Lesetja Kganyago reiterated that macro-prudential vigilance will continue, with attention on illicit-finance risks in fintech and crypto transactions. The National Treasury meanwhile confirmed that the inter-departmental committee on AML/CTF supervision will remain permanent, reflecting an institutional learning curve from the grey-list episode.

While delisting brings immediate market relief, analysts caution that persistent structural constraints — such as slow judicial follow-through and limited prosecutorial capacity — still weigh on the system’s deterrence credibility. Maintaining FATF-grade compliance will require ongoing investment in digital monitoring and inter-agency coordination across tax, customs, and policing units.

Nonetheless, Pretoria’s achievement signals restored policy discipline and regulatory trustworthiness at a time when global investors increasingly differentiate between frontier and compliant emerging markets. With the DXY trending softer, the timing amplifies currency support and strengthens South Africa’s case for renewed capital inflows through 2026.