October 8, 2025 | Policy Alerts

Policy Alert: Congress Must Act to Keep South Africa on FATF Grey List

October 8, 2025 Policy Alerts

Policy Alert: Congress Must Act to Keep South Africa on FATF Grey List

Bottom Line Up Front

From October 20–24, the Financial Action Task Force (FATF) will meet in Paris, where it will determine whether South Africa should remain on its “grey list.” Pretoria is lobbying for removal, but the evidence is clear: South Africa has not earned removal. Endemic corruption, entrenched terror financing networks, and pervasive organized crime continue to undermine the country’s financial system. Removing South Africa from the grey list now would be premature, reward its failures, and embolden illicit actors.

Congress should urge the Trump administration to stand firm at the October plenary to ensure South Africa remains on FATF’s grey list until Pretoria demonstrates credible enforcement of anti-money laundering and counterterrorist financing standards.

FDD Action Expert Analysis

“South Africa has not earned removal from the FATF grey list and pretending otherwise undermines U.S. security interests. Terrorist financiers tied to Hamas, ISIS, and Al-Shabaab operate with impunity, corruption remains systemic, and organized crime networks use South Africa as a gateway into the global financial system. Until Pretoria prosecutes terror networks, reins in illicit finance, and proves it can enforce basic global standards, Congress must insist that the U.S. Department of the Treasury hold the line and fight to keep South Africa on the grey list.”

Nick Stewart

Managing Director of Advocacy, FDD Action

Why It Matters

The FATF grey list is a critical enforcement tool that serves U.S. interests.

  • The Financial Action Task Force (FATF) sets global standards for combating money laundering, terrorist financing, and other threats to the international financial system. When FATF identifies countries with serious shortcomings, it places them on the “grey list.”
  • This designation carries significant economic and reputational costs. Grey-listed countries are subject to closer scrutiny by global banks, investors, and credit rating agencies. This scrutiny pressures governments to adopt real reforms and demonstrate enforcement before they can be removed. Prematurely lifting a country from the grey list undermines this leverage, weakens the FATF system, and rewards bad actors.

South Africa was added to the FATF grey list in February 2023.

  • FATF cited strategic deficiencies across South Africa’s financial system, including weak transparency on beneficial ownership, inadequate supervision of high-risk sectors such as casinos and real estate, and a lack of prosecutions for money laundering and terror financing.
  • The decision reflected longstanding concerns about systemic corruption, weak enforcement, and South Africa’s permissive environment for illicit finance. Pretoria agreed to a 22-point action plan in response, but many of these reforms remain incomplete. 

South Africa’s corruption problem is deeply entrenched.

  • South Africa’s financial system is still reeling from the legacy of state capture under former President Jacob Zuma, when powerful networks of officials and business leaders looted billions from public coffers. South Africa’s National Prosecuting Authority is underfunded and politically compromised, leaving senior officials immune from accountability.
  • The Zondo Commission, which was a years-long judicial inquiry into corruption, implicated hundreds of individuals and entities. Despite overwhelming evidence, the country has secured few convictions.
  • Major state-owned enterprises such as Eskom (the national power utility) and Transnet (the freight transport and logistics company) continue to bleed resources due to fraud and mismanagement.

South Africa is still a hub for terrorist financing.

  • In addition to systemic corruption, South Africa is also a permissive environment for terrorist financing. Financial networks operating inside the country have been linked to Hamas, ISIS, and Al-Shabaab. Pretoria has failed to dismantle or sufficiently prosecute these networks.
  • The Al-Quds Foundation of South Africa, which is affiliated with a U.S.-sanctioned organization, openly fundraises while expressing support for Hamas. The U.S. Treasury Department sanctioned ISIS cells based in South Africa in March and November 2022, just prior to its grey listing.
  • Disturbingly, this summer an individual designated by the United States for terror ties to ISIS, petitioned South Africa’s Electoral Commission to place the Islamic State of Africa on a local election ballot. The petition was denied but underscores how freely those with terror ties operate in South Africa.

Organized crime continues to exploit weak regulation.

  • South Africa is also a critical transit point for global organized crime. International drug cartels, including Mexican groups designated as terrorist organizations by the United States, launder profits through South African banks and front companies. The country is also a hub for illegal gold mining, where armed gangs known as “zama-zamas” extract gold and launder illicit profits through exports and trade-based schemes.
  • These networks fuel a sprawling underground economy. Yet prosecutions for money laundering remain rare, and regulatory enforcement is minimal, leaving South Africa a prime gateway for illicit financial flows into the global system.

South Africa is increasingly aligning its foreign policy with U.S. adversaries like Russia, China, and Iran.

  • In August, South Africa’s defense chief met with senior Iranian officials in an effort to expand military cooperation. South Africa has also hosted Russian warships and welcomed sanctioned Russian vessels and aircraft. It also signaled openness to nuclear cooperation with Moscow and Tehran. South Africa led the lawfare campaign against Israel at the International Court of Justice, filing a bogus charge against Israel just after Hamas’s October 7 attack and aligning Pretoria closely with Hamas and Iran.
  • Together, these examples demonstrate South Africa’s accelerating strategic realignment toward U.S. adversaries and reinforce the need for continued FATF scrutiny and firm congressional oversight.

Premature removal would undermine FATF credibility and U.S. interests.

  • FATF created the grey list to ensure countries follow through on reforms before they are rewarded. South Africa has made promises, but it has not delivered. Its regulatory institutions remain politicized, prosecutions are scarce, and enforcement is weak.
  • Removing South Africa from the grey list now would absolve Pretoria of responsibility and undermine the credibility of FATF itself, signaling to other countries that they can lobby their way out of scrutiny rather than demonstrate real progress.
  • The United States depends on FATF to safeguard the global financial system from money laundering, terror financing, and corruption. Letting South Africa off the hook would weaken both global standards and U.S. leadership in enforcing them.

Three Things Congress Can Do

Press the administration to stand firm at FATF. 

  • Congress should urge the Treasury Department to oppose South Africa’s premature removal from the grey list at the October FATF plenary. The United States is among the most influential FATF voices, and Treasury’s positions often shape the outcome of deliberations. If Washington signals flexibility, other member states are likely to follow. Clear, bipartisan congressional pressure will help ensure that the administration takes a firm line and insists that Pretoria show real enforcement progress, not just empty promises, before it is rewarded with removal.

Reinforce clear U.S. priorities in FATF deliberations. 

  • FATF’s credibility depends on consistent application of its standards. Lawmakers should emphasize that South Africa’s failures directly touch on U.S. national security interests: its financial networks have supported Hamas, ISIS, and Al-Shabaab; corruption has drained billions from state institutions; and organized crime syndicates launder profits that spill into the global system. Members of Congress should underscore that removal from the grey list must be contingent on: (1) dismantling terror financing networks, (2) cutting ties to Iran-backed entities, and (3) demonstrating credible anti-corruption prosecutions.

Support legislation to hold South Africa accountable for its deepening ties to U.S. adversaries. 

  • Congress can reinforce U.S. leadership by advancing measures such as H.R.2633/S.2752, the U.S.–South Africa Bilateral Relations Review Act of 2025. This bipartisan and bicameral legislation requires a comprehensive review of the U.S.–South Africa relationship, with a focus on Pretoria’s troubling ties to malign actors, its failure to enforce anti-money laundering and counter-terrorist financing standards, and its alignment with adversarial regimes like Russia and Iran. This bill sends a powerful message that Congress is prepared to hold South Africa accountable not only at FATF but across the full spectrum of bilateral relations. FDD Action supports this legislation and urges Members to co-sponsor it.

Additional Resources

Issues:

Sanctions and Illicit Finance South Africa