A Western Financial Whip Was Lifted From South Africa’s Back – But Now We Need Another

The October 24 decision by the Paris-based Financial Action Task Force (FATF) to end the ‘grey list’ stigmatization against the banking systems of South Africa, Mozambique, Nigeria and Burkina Faso raises tough questions about these societies’ self-interest, in contrast to the real winners from the move: free-wheeling financiers of capital flight, of drugs and of (alleged) terrorism.

As Reuters reported, “Analysts say getting off the list could make it easier for capital to enter the four African countries. It could also benefit companies and households in those countries by lowering funding costs. The International Monetary Fund (IMF) has estimated that being on the list reduces foreign capital inflows by approximately 7.6% of gross domestic product.” Likewise, newspaper headlines in Johannesburg screamed, “Markets cheer as South Africa exits FATF grey list.”

In February 2023, the local finance ministry (Treasury) and central bank were deemed incapable of enforcing FATF’s rudimentary regulations against errant bankers, and warnings to Pretoria from the FATF headquarters in Paris – which were regularly issued since 2019 – finally became a formal penalty. But South African authorities have since then jumped through 22 different hoops to try to make amends, leading to a positive review.

South African elites view the FATF – a creation of the G7 Western imperialist powers – the way they do the New York credit ratings agencies and IMF, as infallible, rigorous and worthy of respect. But the world’s leading expert on tax havens and a former McKinsey chief economist, Jim Henry, reminds me (in private correspondence) that in reality, “The FATF grey list is a joke. It routinely skips over the real tax havens” such as the City of London, Wilmington and Zurich. He points to how the most dubious new site for storing ill-begotten gains, Dubai, has been rewarded undue credibility by both the Biden Administration and the BRICS bloc of emerging powers – which it joined in 2024 – and hence there was an early, unjustified exit of the United Arab Emirates from the grey list.

Henry continues his critique: “FATF’s actual budget for enforcement is very limited. Its overall budget for pursuing Anti-Money-Laundering has shrunk. And it doesn’t have the guts to take on enablers: bankers, lawyers and consultants.” The FATF is not effective in any case, according to Henry, because “most international money laundering arrangements these days are multi-haven, fast, and composed of intrinsically anonymous assets like crypto, commercial real estate, private equity. The AI challenge is already making all this far worse.”

It’s terribly important to get a handle on illicit financial flows. As Henry reminds, “The ability of countries like South Africa to avoid being awash with dirty money, and to levy taxes on wealthy individuals and corporations, is being squeezed by the dominant players in the international system.”

One reason for the squeeze is that the FATF, IMF, financial commentators and corporate journalists do not have a broad enough field of vision and so would logically not mention much less consider many other factors that throw the grey delisting into question.

Corporate corruption on the rise, and rife in South Africa

Most importantly, the FATF decision occurs in the context of a corporate corruption pandemic in South Africa. Since the early 2000s, firms in Johannesburg, Stellenbosch, Cape Town and Durban have been considered the ‘world fraud champs’ in biannual economic crime surveys by PriceWaterhouse Coopers (PwC). This in part the result of regulators such as the Johannesburg Stock Exchange (JSE) acting far too late and biting with too few teeth.

Investors and the society suffer systemic graft but the JSE continues to soar, because when not being exported, its listed corporations’ profits are gambled in short-termist portfolios instead of in long-term fixed capital. Indeed the upsurge of graft and parasitical speculation since 1994 comes as no surprise, given not only the post-apartheid government’s neo-liberal policy orientation, but that Johannesburg capital had very profitably participated in what the United Nations termed a ‘crime against humanity’ – apartheid – so as to gain (white) power over black bodies and mineral extraction. They never paid a wealth tax as reparations for that exceptionally lucrative injustice.

(The incoming U.S. Ambassador to South Africa, Brett Bozell, in 1987 firmly opposed the liberation of South Africa, which was led by Nelson Mandela’s African National Congress, which he labeled ‘terrorist.’)

There’s additional crucial international context: Donald Trump’s non-enforcement of 1970s-era U.S. public interest legislation considered vital to watchdogging corporations, especially the Foreign Corrupt Practices Act (FCPA), not to mention the wide range of laws and regulations against corporate environmental crimes.

As an example of its importance, the FCPA was used by the U.S. Securities and Exchange Commission in 2015 to prosecute Tokyo-based Hitachi’s bribery of South Africa’s ruling African National Congress (ANC), so as to win construction contracts for two massive coal-fired power plants. Hitachi’s gift to the ANC of 25% of its local subsidiary was given via energy parastatal Eskom, chaired by a former ‘environment minister’ who at the same time was serving on the ANC’s fund-raising committee, hence guilty of conflict-of-interest. The deal was responsible for massive destruction – many tens of billions of dollars’ worth – in the form of project delays and electricity shortages. While Hitachi paid a tokenistic $19 million fine to Washington, none of us in South Africa have been compensated for the enormous losses due to the plants’ innumerable flaws.

The FCPA’s demise suggests we will all suffer much greater depravity in late-2020s global capitalism. The Department of Justice is now going to implement the FCPA under delimited conditions (according to law firm Holland & Knight), e.g., “whether the alleged misconduct has caused economic harm to American companies and individuals [and] whether the bribery scheme threatens U.S. national security interests or key assets and infrastructure.” Indeed, the more confident U.S. firms that participated in plundering South African state and parastatal institutions during the 2010s – especially the consultancies McKinsey and Bain – could become even more destructive what with the FCPA’s demise.

South Africa’s regulatory incapacity and dubious leadership

Before lifting Pretoria from the grey list, the FATF should have monitored South African news: its staff would have quickly become aware of a spectacular corruption scandal that since July has engulfed the top layers of the SA Police Service (SAPS) in what has been the lead story on most days. That agency, apparently infiltrated by major crime syndicates, is vital to combatting the main FTAF criminal jurisdictions: drug trade, terrorist financing and immediate violations of currency regulations. (The drug trade roars, particularly through transshipment opportunities, while there have been very rare sightings of extreme-Islamic funding arrangements and only terrorist act dating to early 2020.)

Such violations were obvious in South African President Cyril Ramaphosa’s personal actions and state support following the theft of $580,000 (but likely much more) in 2020 from his ‘Phala Phala’ cattle ranch. Although the culprits were apprehended, that dollar-denominated cash-in-couch incident was mishandled by SAPS, as well as by the SA Revenue Service (SARS) taxman, the SA Reserve Bank (SARB) which manages exchange controls, and the ruling ANC notwithstanding a damning parliamentary inquiry. All appear to have turned a blind eye to President Ramaphosa’s own prima facie tax and exchange control violations, and the FTAF also had to look the other way given that the scandal returned to high-profile mainstream news coverage on at least a half-dozen occasions during the 30-month grey listing period.

Reflecting Ramaphosa’s own disregard for financial decorum, his central role in moving Illicit Financial Flows to Bermuda as a tax dodge, entailed diverting profits from platinum mines in the years immediately before the 2012 police massacre of three-dozen striking mineworkers at Marikana, the most traumatic post-apartheid incident. The company he invested in – to dig out what remains the world’s largest supply of platinum – was Lonmin, which in the 1970s earned the label ‘the unacceptable face of capitalism,’ from a British Conservative Prime Minister.

The FATF may have felt that prosecution of Illicit Financial Flows is improving, but in reality the inability and unwillingness of the Ramaphosa-era National Prosecuting Authority (NPA) to address high-profile corruption cases associated with financial thievery was in part due to ‘sabotage,’ according to its director, who has complained publicly since mid-2025. For example, notwithstanding vast evidence, the NPA has been consistently unable to provide Emirati authorities with an extradition application to bring the notorious Gupta family back from Dubai to South Africa to stand trial.

Another example of what the FATF should have considered a red flag was Finance Minister Enoch Godongwana’s violations of ‘fit and proper’ responsibility that should have earned a lifetime ban. He apparently drained $5 million of clothing and textile worker pensions and as a result was reportedly compelled to resign from a deputy ministry in 2012, following an incident in which he was fired as a provincial finance minister for alleged corruption a few years earlier.

In another case that since 2023 has received wide attention, the FATF did not remark on how Treasury and the SARB were asleep at the wheel during Rand manipulation by major foreign and local banks, in the currency traders’ revealingly-named “ZAR Domination” chatroom. This abuse was successfully prosecuted in the U.S. (by the State of New York, due to all the NYC banks involved) and the process was also begun by Pretoria’s Competition Tribunal, due to the chatroom conduct being “considered the most egregious in competition law.” Confessions and penalty fines were then provided by several banks, even though then-Finance Minister Tito Mboweni remained in denial that anything untoward was happening, openly pooh-poohing the Commission’s investigation in 2019 during parliamentary questions. Likewise in 2023, SARB refused to take any action against the ZAR-Domination traders. Commercial banks comprise the central bank’s main shareholders (it is not a publicly-owned institution unlike most).

And in another case of far too little regulation, far too late, in mid-October the SARB finally made partial amends on its failure to enforce exchange controls against blatant fraud involving the SA-German firm Steinhoff. Over more than a decade, billions of dollars’ worth of dividends, shareholder equity and tax revenues had been lost to Steinhoff CEO Markus Jooste’s extraordinary thievery prior to his 2024 suicide.

So FATF is allowing South African financiers and three other countries with equally serious problems of multinational corporate extractivism to exit the grey list at the same time. In each country, one of the main vehicles for Illicit Financial Flows is mining and fossil-fuel ‘transfer pricing’, as well as the depletion of non-renewable resource wealth without fair compensation or reinvestment. Beleaguered public-interest organizations in these sites would no doubt have told FATF staff (if asked) that – notwithstanding Ibrahim Traore’s anti-Western coup in Burkina Faso – nothing much has changed to improve state regulatory capacity and political will against the banksters (especially in Mozambique and Nigeria).

The outcomes of rewarding all the dubious activity noted above will no doubt include more international ‘hot money’ flooding in, since interest rates being paid in African countries are far higher than elsewhere. African societies would be better off with less such parasitical rent seeking; after all, due to many firms listed that generate profits broad, the JSE is considered to host the world’s highest consistent ‘Buffett Indicator’ (market capitalization/GDP) and a simultaneous ‘capital strike’ by corporates unwilling to invest their vast liquid funds into fixed investment, infrastructure, etc.

Solutions the FATF won’t abide by

To solve these outflows, there is a precedent that the FATF and mainstream commentators won’t discuss: tightening exchange controls. Yet from the mid-1990s, the massive escape of apartheid-era profits followed the 1995 lifting of what were once fairly strict SA exchange controls – first, abolition of the ‘Finrand’ (a dual currency imposed in September 1985 during the Botha Regime’s debt default in order to halt white capital flight, at a time of rigorous global anti-apartheid financial sanctions imposed on banks not by governments but by anti-apartheid activists); and second, permission granted by Pretoria for more than three dozen deregulations since then. The worst came in 1999, when most big firms began relisting their primary shareholdings from the JSE to the stock markets of London, New York and Melbourne.

The FATF and other Western-gazing financial analysts won’t mention the tightening of the remaining exchange controls as an option, because it would restore much-needed monetary sovereignty, i.e., allow the SARB to lower interest rates to reasonable levels. Rates paid to investors are now running at 10% on SA’s 10-year bonds, one of the world’s five highest amongst all countries issuing such bonds.

Illicit Financial Flows are, even the Treasury admitted in 2019, in the range of 3-7% of annual GDP, with no indication that the rate slowed during and after Covid-19. The FATF’s retreat means that public interest agencies, academics and reporters will have to become much more rigorous. Occasionally, state media covers Illicit Financial Flows with a critical perspective; and investigative journalists at Open Secrets have led the way. A few civil society groups also condemn Illicit Financial Flows: e.g. the SA Federation of Trade Unions is most vocal and the Alternative Information and Development Centre issues periodic reports.

Across Africa, groups like Tax Justice Network Africa, the African Forum and Network on Debt and Development and Trust Africa keep alive the demand to ‘stop the bleeding,’ which can only be done if tighter tourniquet-style exchange controls are applied.

And on the inside, brave whistleblowers periodically release damning files – the Gupta brothers’ 35,000 emails, the Panama Papers and the Al Jazeera report on the Gold Mafia – all of which implicate South Africa as a loose-money jurisdiction. But Pretoria lacks the political will, plus the committed policing, prosecution and especially Treasury and SARB regulation required, to take these revelations to their logical conclusion.

So civil and uncivil society will have to become more capable, e.g. calling for boycotts against banks and corporates that continue to loot. A good example is the new campaign by Johannesburg-based Mining Affected Communities United in Action against what historically has been the main firm engaged in the underdevelopment of South Africa through not only capital flight but gold-wealth depletion: Anglo American Corporation.

The FATF would have been utterly useless in these broader efforts to establish sovereignty. But with their departure – and the now disposed-of Western whip on the back of South African banking – society certainly needs others.

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