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Speaker 1: Bloomberg Audio Studios, podcasts, radio news.

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Speaker 2: South Africa and Nigeria are set to be taken off

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Speaker 2: a global dirty money list in just a matter of weeks.

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Speaker 2: Nigeria has recorded commendable progress under Financial Action Tax Force

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Speaker 2: International Corporational Review Group Action Plan after two and a

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Speaker 2: half years of heightened scrutiny by the Financial Action Task Force.

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Speaker 2: Exiting the list could boost investor confidence in two of

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Speaker 2: Sub Saharan Africa's largest economies.

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Speaker 3: To secure our removal from the International Financial Action.

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Speaker 4: Task Force gray List, we have made significant progress.

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Speaker 2: On today's episode of The Next Africa Podcast, we'll look

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Speaker 2: at how South Africa and Nigeria found themselves on the

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Speaker 2: watchdog's gray list in the first place, and how they've

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Speaker 2: managed to turn things around. I'm Jennifer Zabasaja, and this

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Speaker 2: is the Next Africa Podcast, bringing you one story each

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Speaker 2: week from the continent driving the future of global growth

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Speaker 2: with the context only Bloomberg can provide. Joining me this

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Speaker 2: week is our Africa Economics and Government editor Monique Vanek

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Speaker 2: and our business correspondent Ben Bartenstein. Thank you both for

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Speaker 2: coming on and for sharing more about some of your reporting. Ben,

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Speaker 2: maybe we can start with you can you first explain

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Speaker 2: a bit about who the Financial Action Task Force are

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Speaker 2: and what this so called dirty money list or gray

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Speaker 2: list actually is for people who maybe don't know the

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Speaker 2: nitty gritty like you do.

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Speaker 3: So the FATF it's a Paris based multilateral that is

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Speaker 3: really focused on countering money laundering but also terrorist financing.

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Speaker 3: You could think of it as sort of the IMF

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Speaker 3: for tackling dirty money. The group's membership spans both east

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Speaker 3: and west. You have the US, the UK, the EU,

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Speaker 3: but also China, India, Japan among its key members, and

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Speaker 3: the group sets standards for how both governments and private

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Speaker 3: sector companies can best combat illicit financial flows. But also

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Speaker 3: the group also conducts country evaluations to really measure two things.

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Speaker 3: One is technical compliance, what are the laws on the

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Speaker 3: books in a particular country to combat aml CFT but

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Speaker 3: also effectiveness how effectively are those countries implementing the laws

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Speaker 3: on the books. So when a country falls short of

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Speaker 3: enough of those metrics, they're at risk of gray listing,

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Speaker 3: and that means they're subject to increase monitoring from the FATF.

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Speaker 3: That entails tighter, higher compliance costs for banks, and it

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Speaker 3: also really has implications for foreign investments into that country

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Speaker 3: and also for remittances flowing back to the country, as

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Speaker 3: well as kind of a broader impact on the market.

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Speaker 3: A pop in South African bank shares after the news

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Speaker 3: that we reported on South Africa being poised to exit

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Speaker 3: the list in the next few weeks. It's important to

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Speaker 3: also note that there is a blacklist. The key distinction

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Speaker 3: there is that a gray list entails that the country

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Speaker 3: is agreeing to work with FATF to try to address

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Speaker 3: their deficiencies, or as a blacklist implies that the country

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Speaker 3: really isn't engaging with FATF. So there are roughly two

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Speaker 3: dozen countries that are the gray list at the moment,

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Speaker 3: including South Africa and Nigeria, and three countries at the

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Speaker 3: moment Iran, North Korea and me and mar that currently

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Speaker 3: sit on the blacklist.

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Speaker 2: And so you mentioned South Africa and Nigeria, which is

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Speaker 2: of course our focus for the week. When we look

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Speaker 2: back at when these two countries were put on the list,

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Speaker 2: what were some of the concerns were they some of

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Speaker 2: the concerns that you were just alluding to there.

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Speaker 3: Yeah, so some of the concerns were shared around beneficial ownership,

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Speaker 3: transparency is and kind of a key theme across a

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Speaker 3: lot of the countries evaluated by the FATF where there

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Speaker 3: aren't the adequate registries to actually show who was the

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Speaker 3: ultimate owner behind a particular company in that country, so

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Speaker 3: both countries shared that as a concern. South Africa also

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Speaker 3: had some concerns around limited success when it comes to

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Speaker 3: money lundering prosecutions, also some questions around asset recovery and

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Speaker 3: challenges that have happened there, and also gaps when it

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Speaker 3: comes to supervision of the banks, casinos in the property sector.

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Speaker 3: So one of the overarching themes or areas of concern

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Speaker 3: was around corruption and state capture in South Africa, whereas

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Speaker 3: for Nigeria, there were more concerns around just sort of

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Speaker 3: the lack of terrorist financing prosecutions and also some of

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Speaker 3: the cross border risks when it comes to cash smuggling.

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Speaker 3: So you could say one of the more overarching concerns

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Speaker 3: was primarily around terrorist financing, especially any risks associated with Boco,

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Speaker 3: Haram Monique.

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Speaker 2: Let's bring you in here and maybe get into the

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Speaker 2: economic hit that these countries maybe saw as a result

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Speaker 2: of being put on this list. We've heard them talk

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Speaker 2: about wanting to exit the list for quite some time.

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Speaker 2: But what have we seen over the past few years

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Speaker 2: the impact of this listening?

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Speaker 4: So we have seen some investors being very cautial, surbout

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Speaker 4: it basic in these countries, but a lot of them

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Speaker 4: were waiting to see whether they could get off by

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Speaker 4: this year, and the feting was that if they didn't,

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Speaker 4: that's what the real economic impact would be felt. Where

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Speaker 4: we did see impact was on the thanks that other

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Speaker 4: financial institutions and that the cost of compliance went up,

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Speaker 4: so they had to do more paperwork and get their

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Speaker 4: clients to give them more information to basically transect or sure.

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Speaker 2: Monique, you were speaking a little bit about the economic

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Speaker 2: hit that we've seen from being listed. What exactly have

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Speaker 2: we seen from the governments though of these two countries

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Speaker 2: to instill some investor confidence. Is it at where these

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Speaker 2: countries want it to be or is there still a

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Speaker 2: bit of work to be done.

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Speaker 4: So in so Africa's case, interestingly, we saw a big

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Speaker 4: effort by government to work with the private sector to

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Speaker 4: get off the gray list. And what we did see

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Speaker 4: the private sector doing was contributing prosecutorial know how to

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Speaker 4: the authorities to ensure they could beef up the prosecution

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Speaker 4: cases and also beef up the ability to follow illicit

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Speaker 4: financial flows and a Nigeria's case, what was also interesting

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Speaker 4: there was that we saw the government appointing professionals to

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Speaker 4: take charge of its anti corruption authorities, so they both

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Speaker 4: made a concerted effort to try and get off this list,

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Speaker 4: and we also saw them both implementing legislation that allowed

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Speaker 4: them to tighten controls overly illicit financial flows and improve supervision.

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Speaker 2: How challenging has it been for them to achieve some

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Speaker 2: of these goals, Monique, I.

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Speaker 4: Think for Sooth Africa on the prosecutor real issues, it's

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Speaker 4: been very challenging because there's been a lot of court

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Speaker 4: cases against raft that haven't gone according to their favor

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Speaker 4: because they've just been so weakened by previous administrations that

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Speaker 4: effectively hollowed out the ability to prosecute high profile cases.

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Speaker 4: So that's where the private sector became quite important in

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Speaker 4: trying to just boost the people that they had within

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Speaker 4: their prosecutorial authority to try to get these cases prosecuted.

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Speaker 2: And in the case for Nigeria, I mean clearly trying

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Speaker 2: to target some of these terror groups is not an

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Speaker 2: easy task, and especially if we think about the new administration,

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Speaker 2: the Tanubu and administration coming in with a number of

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Speaker 2: other priorities. How much of a challenge would you say

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Speaker 2: that's been.

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Speaker 4: Yeah, I think that's been very difficult for Nigeria. I

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Speaker 4: think they're still trying to deal with the terrorist groups

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Speaker 4: in the north of the country that are consistently proving

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Speaker 4: to be difficult to control.

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Speaker 1: Stay with us, Monique, bad we come back.

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Speaker 2: We'll look at exactly how the task Force makes the

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Speaker 2: final decision and whether these countries can actually expect to

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Speaker 2: stay off the list for a long time.

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Speaker 1: We'll be right back.

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Speaker 2: Welcome back today on the podcast, we're talking about the

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Speaker 2: likely exit of Nigeria and South Africa from the so

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Speaker 2: called Dirty Money List. Monique Vennik and Ben Bartenstein are

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Speaker 2: still with me. Ben, you spoke earlier about this task

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Speaker 2: force and the looming meeting that both of these countries

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Speaker 2: have been waiting quite some time for what actually happens.

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Speaker 2: At the meeting later this month, will they be assessing

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Speaker 2: some of the progress points that these countries have made

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Speaker 2: and when will we know whether or not they're definitively

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Speaker 2: off this list.

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Speaker 3: Yeah, so, I mean the meeting and in particular the

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Speaker 3: last couple of days of the plenary, which will be

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Speaker 3: happening in late October. That's sort of the marquee moment

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Speaker 3: as far as when we learn about listings and delistings,

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Speaker 3: but really there's a huge build up to that moment.

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Speaker 3: It's really a multi step process when we think back

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Speaker 3: to when South Africa and Nigeria were originally listed back

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Speaker 3: in twenty twenty three and the steps that have to

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Speaker 3: happen before you get to this moment. First, there's an

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Speaker 3: action plan that's developed with the FATF in which the

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Speaker 3: FATF kind of charts the course for how they can

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Speaker 3: ultimately get off the gray list. Second, you have this

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Speaker 3: implementation and monitoring stage that includes implementing some of those

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Speaker 3: reforms that Monique was talking about. And then third is

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Speaker 3: the on site visit, in which FATF assessors will actually

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Speaker 3: go into the country meet with both government officials but

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Speaker 3: also members of the private sector, oftentimes huddling with a

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Speaker 3: lot of the key financial institutions in the country to

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Speaker 3: really make sure whether these reforms were actually implemented and

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Speaker 3: get a progress report. Usually that type of on site

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Speaker 3: visit doesn't happen unless the FATF has really high confidence

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Speaker 3: that a dlisting is imminent. So we saw those on

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Speaker 3: site visits happen in recent weeks. We you know, in

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Speaker 3: talking with our sources, gathered that you know, there was

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Speaker 3: significant progress that was attained during those visits. And then

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Speaker 3: when it comes to actually the meeting in Paris later

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Speaker 3: this month, it's really kind of a final ticking of

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Speaker 3: the box exercise, which it's not a foregone conclusion, but

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Speaker 3: they look back at the on site visit, they look

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Speaker 3: back at all the progress over the two and a

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Speaker 3: half years in this case, and ultimately then you have

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Speaker 3: a search for consensus. It's a bit of a secretive process.

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Speaker 3: There's no precise definition that the FATF phrases when it

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Speaker 3: comes to what is consensus, but effectively, what it means

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Speaker 3: is that each delegation has a say and if there's

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Speaker 3: essentially no major noises or opposition to a particular decision,

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Speaker 3: then it will pass through. So usually these decisions are

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Speaker 3: fairly straightforward at this point, so that will become official.

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Speaker 3: Then on the Friday, which is October twenty fourth, Wow.

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Speaker 2: And Monique, could we potentially see good news for other

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Speaker 2: African countries that are on the list. What do we

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Speaker 2: know potentially about what else could come out of this meeting.

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Speaker 4: Yes, we could see Mozambique and Bikino Busse also coming

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Speaker 4: with that list later this we both countries have cited

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Speaker 4: that they've met the tasks that they've been asked to

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Speaker 4: deal with by the fat to get off the list.

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Speaker 4: And interestingly, in Mozabik's case, an official that we did

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Speaker 4: speak to say there could be a game change of

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Speaker 4: all the country they are removed, because Total Energies has

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Speaker 4: just said that it's ready to resume its lergy project

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Speaker 4: that was delayed for several years because of at texts

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Speaker 4: by Islamic miletants nearby its facilities.

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Speaker 2: And Ben, is that your expectation as well? Potentially good

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Speaker 2: news for these countries.

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Speaker 3: That's right. I mean there were recent on site visits.

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Speaker 3: Our understanding is those went quite well, so that would

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Speaker 3: pave the way for an It's also important to note

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Speaker 3: that under the presidency FATF presidency of Elisa Deyanda Madrazo,

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Speaker 3: she's a Mexican official, there's been kind of a renewed

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Speaker 3: focus within the FATF as far as how they think

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Speaker 3: about these listing decisions, and one area of emphasis under

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Speaker 3: her presidency has been factoring in what the UN calls

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Speaker 3: least developed countries and thinking about the capacity that some

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Speaker 3: of these countries have to really tackle financial crime issues.

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Speaker 3: It's not to absolve them of any responsibility, but it's

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Speaker 3: just a factor in that certain countries have a bit

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Speaker 3: more capacity than others. So that is also now getting

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Speaker 3: factored into these delisting decisions. And also part of that

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Speaker 3: is to kind of take into context that inherently larger

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Speaker 3: economies will have more systemic risk when it comes to

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Speaker 3: if the US or the UK as a gaping hole

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Speaker 3: in its financial system when it comes to money laundering

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Speaker 3: or terrorist financing, that has more systemic risk than a

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Speaker 3: much smaller economy that is less connected to the global markets.

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Speaker 2: Are there any conditions ben that these countries have to

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Speaker 2: agree to to ensure that they don't fall back on

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Speaker 2: the list or is this sort of a foregone conclusion

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Speaker 2: that they're if it does go as expected, they're off

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Speaker 2: the list and that's where the FATF's role in all

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Speaker 2: of this sort of ends.

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Speaker 3: Yes, it's far from a foregone conclusion, you know. One

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Speaker 3: prominent example was Panama, which actually got off the list

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Speaker 3: in twenty sixteen, but was listed once again in twenty nineteen,

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Speaker 3: so that was a prominent recent example in which a

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Speaker 3: country you know, had made progress, the fat recognized that progress,

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Speaker 3: but then soon after they were listed once again. Of course,

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Speaker 3: a lot of this is contingent upon the FATF's calendar.

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Speaker 3: The FATF actually just completed its fourth round of mutual

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Speaker 3: evaluations and is now starting its fifth round, which means

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Speaker 3: there's a whole kind of chronology as far as which

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Speaker 3: countries are now going to get their fifth round assessments.

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Speaker 3: So some countries are kind of early in the pecking order.

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Speaker 3: In South Africa's case, South Africa could have a possible

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Speaker 3: on site in April twenty twenty seven. Nigeria, at least

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Speaker 3: to my knowledge, is not on that calendar quite yet,

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Speaker 3: so that suggests that possibly a next decision on Nigeria

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Speaker 3: could be further out than South Africa. But certainly the

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Speaker 3: important thing to note when it comes to the fifth

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Speaker 3: round is there are new criteria. So whilst South Africa

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Speaker 3: is currently being judged on the fourth round criteria, soon

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Speaker 3: after when they come up for their fifth round evaluation,

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Speaker 3: there's a whole new set of criteria and standards they

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Speaker 3: have to meet. So yeah, it's far from a foregone conclusion,

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Speaker 3: but certainly there's positive momentum if they get off the list.

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Speaker 3: It's a recognition from the FATF that the government has

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Speaker 3: really shown political will to push forward with these policies

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Speaker 3: to counter money laundering and terrorist financing.

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Speaker 2: Yeah, you can only expect that it will be welcome

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Speaker 2: news for both of these countries if in fact we

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Speaker 2: do see the decision being made in their favor.

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Speaker 1: We'll leave it there.

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Speaker 2: Really, I appreciate both of you and your reporting on

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Speaker 2: this show this week. That has been Bartenstein and also

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Speaker 2: Monique Vanek joining us this week.

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Speaker 1: Thank you both so much.

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Speaker 2: Thank you, thank you, and you can read our reporting

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Speaker 2: on the Financial Action Task Force across Bloomberg platforms. Now

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Speaker 2: here's some of the other stories we've been following across

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Speaker 2: the region this week. Zimbabwe's dollar only stock market is

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Speaker 2: riding a wave of gains powered by gold miners cashing

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Speaker 2: in on a forty eight percent jump in the precious

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Speaker 2: metal this year, and energy firm Rhino Resources has found

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Speaker 2: gas conenset at another well off Namibia, the latest in

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Speaker 2: a string of discoveries off the coast of the southern

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Speaker 2: African nation in recent years.

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Speaker 1: You can follow these stories.

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Speaker 2: Across Bloomberg platforms now, including the Next African Newsletter. We'll

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Speaker 2: put a link to that in the show notes. This

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Speaker 2: program was produced by Adrian's Bradley and Tiba Adebaio.

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Speaker 1: Don't forget to follow and review this show.

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Speaker 2: Wherever you usually get your podcasts, But for now, I'm

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Speaker 2: Jennifer Zabasaja.

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Speaker 1: Thanks as always for listening.