Banks must act within an 18-month timeframe to influence South Africa’s grey-listing

In January 2025, the Financial Action Task Force (FATF), a global anti-money laundering watchdog, is set to review South Africa’s greylisting and assess the effectiveness of measures taken by the public and private sectors to address concerns related to money laundering and financial crimes. Failure to demonstrate a practical and scalable plan could result in severe economic repercussions, including reduced international capital inflows, credit rating downgrades, and negative impacts on the Rand. This situation also poses a significant threat to state-owned enterprises reliant on offshore debt capital markets for funding.

However, South Africa can learn from Mauritius, which successfully met FATF’s criteria and was removed from the grey list in just two years through focused attention and collaboration between the public and private sectors. Now, South African financial institutions face heightened scrutiny, with only 18 months to showcase an effective anti-money laundering (AML) strategy. Fortunately, advancements in technology offer sufficient time to make significant strides in reversing the greylisting.

The Achilles heel of the banking sector lies in money laundering, particularly in cross-border transactions, where banks remain vulnerable. Shockingly, despite the government estimating that R35bn-R143bn is laundered through local financial institutions annually, only 1% of these funds are recovered.

To effectively combat financial crime, banks must address the root cause: identity verification. Ensuring that individuals conducting transactions are who they claim to be is crucial. As digitalization continues to grow, the urgency to counter cybercrime becomes paramount. A report by Interpol predicts a substantial increase in crimes like ransomware and phishing attacks in the coming years, rendering traditional verification technologies, such as one-time passwords, obsolete and insecure.

Digital security threats pose a significant challenge, with two categories of concern: presentation attacks and digital injection attacks. Presentation attacks involve the use of photos or videos to deceive identity verification systems, while digital injection attacks introduce synthetic imagery through techniques like “deepfakes” or “face swaps.” The increase in these attacks demands new, robust methods to prove identity and prevent money laundering and cyberattacks.

In preparation for the 2025 review, financial institutions must fortify their anti-money laundering systems and processes. A crucial aspect is the use of “liveness” in authentication, which confirms the presence of a genuine human being on the other end of a transaction. This approach makes it harder for cybercriminals to forge identities and facilitates safe and verifiable transactions.

Several South African banks have already taken proactive steps, partnering with companies like iiDENTIFii to enhance their digital identification and onboarding processes. The implementation of 4D Liveness technology, resistant to deepfake and replay attacks, has shown promise in strengthening security measures.

To reverse South Africa’s greylisting within the given timeframe, financial institutions and the government must prioritize infallible, sophisticated biometric authentication within the country’s financial services infrastructure. This should not be merely a response to the greylisting but a strategic imperative in an increasingly digitized economic climate fraught with cybersecurity risks. Demonstrating the ability to combat threats globally could instill confidence in both overseas investors and local customers alike. The window of opportunity is clear, and concerted efforts can pave the way for a successful outcome in the fight against money laundering and financial crimes.