Zimbabwe: Fatf Grey List Exit Huge Step

Golden Sibanda and Mukudzei Chingwere

Zimbabwe has been removed from the grey list of the Financial Action Task Force (FATF) with effect from Friday last week, having satisfied the task force during a visit that it is fully compliant in implementing required global anti-money laundering banking standards and that its banks cannot be used by those financing terrorism.

This will make it easier for payments into and out of Zimbabwe, make investment and other flows a lot easier.

It will aslo make it easier for correspondent bank relationships since foreign banks can assume the Zimbabwean payments are legitimate. It also improves the country’s global image by showing that the Second Republic’s anti-corruption and other measures are effective and working.

Fellow SADC members Botswana and Mauritius found immediate benefits when they were removed from the grey list.

Information, Publicity and Broadcasting Services Minister Monica Mutsvangwa said Finance and Economic Development Minister Mthuli Ncube informed Cabinet on the positive development on Tuesday.

Government officials and economic analysts said the move was a huge step in the successful re-engagement efforts of the incumbent Government.

Speaking after the Cabinet meeting yesterday Minister Mutsvangwa said Zimbabwe’s removal from the FATF grey list was testimony to the confidence of the international community in the Second Republic under President Mnangagwa’s leadership.

Countries that exited the grey list of the FATF have often realised significant benefits linked to freedom to relate, interact and engage with the global community, especially as this relates to business and finance.

Currently, the grey list maintained by the FATF is made up of about 24 countries, after Zimbabwe’s removal, which includes Philippines, Barbadoes, Jordan, Turkey and Senegal among others.

FATF announced Zimbabwe’s removal from the grey list, which is made up of countries considered to be insufficiently compliant in implementing anti-money laundering and counter-financing of terrorism standards, following a site visit to the country.

Exiting the grey list improved how Mauritius is viewed and position when doing business with the external world, which now sees it as a safer investment destination than before.

Following its removal from the FATF grey list, the jurisdiction was also removed from the United Kingdom’s High-Risk Third Country list in November 2021.

There also is the possibility the country will also be removed from the European Union’s High-Risk Third Country list, which it has been on since October 2020.

Until the end of the Brexit transition period, the list of high-risk countries was determined by the European Union (EU). This means just by being on the Grey List countries have limitations in terms of how and who they can do business with.

According to the EU’s directive, banks and other gatekeepers are required to apply enhanced vigilance in business relationships and transactions involving high-risk third countries.

The EU is the largest economic bloc in the world. Although growth is projected to be slow, the EU remains the largest economy in the world with a GDP per head of €25 000 for its 500 million consumers.

Even global economic power houses like China, one of Zimbabwe’s major trade partners, are subject to the FATF’s scrutiny. Since the 2019 assessment of China’s measures to tackle money laundering and terrorism financing, the country has taken a number of actions to strengthen its control and monitoring framework.

The FATF was established by the Group of Seven (G7) advanced economies to protect the global financial system. Zimbabwe was placed on the FATF grey list in October 2019 following a mutual evaluation assessment that identified a number of deficiencies in the implementation of AML/CFT standards.

Economist Eddie Cross said the removal of the country from the grey list was a huge step forward for Zimbabwe, stressing the significance should never be underestimated.

“It is a huge step forward; this is massive. It means the reforms we have been introducing to our financial system, including controlling money laundering and all other forms of corruption are being recognised by the international community as being adequate.

“You cannot underestimate the importance, this is important. It is really an essential step in the reengagement with the international financial community. If this had gone the other way we would be in big trouble,” he said.

“It is believed the country may have lost opportunity for significant lines of credit, global financial intermediation and foreign investment due to it being grey listed,” said another economist Blessing Mereka.

Finance and Economic Development Minister Mthuli Ncube said earlier the removal from the list was demonstration of confidence by the international community of progress Zimbabwe has made under President Mnangagwa’s Second Republic.

“Adherence to strict AML/CFT standards is not just a compliance requirement, but enhances the country’s image as a safe destination for investment, strengthens the domestic financial sector and builds on the confidence stakeholders have in Zimbabwe as a committed and responsible member of the global financial ecosystem,” the Minister said in a statement.

He added that the fight against money laundering and terrorism financing remained an ongoing process which shall not end with the country’s exit from the grey list of the FATF.

Recently, when the FATF removed Botswana and Mauritius from its close monitoring list, it noted that Zimbabwe had made progress since October 2019 when it made a high-level political commitment to work with the FATF standards on money laundering and terrorism financing.

FATF president Marcus Pleyer said Botswana and Mauritius completed their white list action plans and were removed from the grey list following an on-site visit.

The FATF said Zimbabwe had substantially completed its action plan and an on-site visit was therefore organised to assess the situation to verify if the implementation of Zimbabwe’s (AML/CFT) reforms had begun and that the necessary political commitment remained in place to sustain its implementation in the future.

Some of the reforms which Zimbabwe has instituted include developing risk-based supervision framework for financial institutions and Designated Non-Financial Businesses and Professions, including through capacity building among the supervisory authority; developing adequate risk mitigation measures among FIs and DNFBPs.

These include by applying proportionate and dissuasive sanctions to breaches; creating mechanisms to ensure that competent authorities have access to timely and up-to-date beneficial ownership information; and addressing remaining gaps in the targeted financial sanctions framework.

Data on how much Zimbabwe has lost due to the grey list is not publicly available but recently, Pakistan, which is also on the list said that the FATF grey listing starting in 2008 till 2019, may have resulted in cumulative real gross domestic product losses of approximately US$38 billion.

For Zimbabwe, the greatest impact is mainly seen through the decline in correspondent banking relationships and foreign direct investment, which stood at US$21 million in the five months to May 2021. Turkey, Mali and Jordan have all been added to the grey list, while Malta was added to the list in June this year.

Turkey said it was working with the to be removed from the grey list for failing to head off money laundering and terrorist financing, its inclusion in which could hurt foreign investment.

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