Relief for Zimbabwe as it exits damaging FATF financial ‘grey list’

FATF relief for Zim, but sanctions still weigh (Photo: Hervé Cortinat / OECD)

The global financial crime watchdog the Financial Action Task Force (FATF) has removed Zimbabwe from its “grey” watchlist, giving some rare relief to an economy battling global financial isolation.

Zimbabwe was put on the FATF grey list in October 2019, on concerns that its financial system did not have enough safeguards to stop the flow of dirty money. The FATF was set up by the G7 nations to enforce anti-money laundering (AML) and combating of financing of terrorism (CFT) rules.

On Friday, the FATF said after a site visit by its experts, it was convinced that Zimbabwe had now done enough financial regulatory reforms to be dropped from the list.

“The FATF congratulated Zimbabwe for the significant progress it has made in addressing the strategic AML/CFT deficiencies previously identified by the FATF and included in its action plan. Zimbabwe will no longer be subject to the FATF’s increased monitoring process. This comes after the country received an on-site visit,” FATF said in a statement.

Zimbabwe improved its risk-based supervision for financial institutions and other private businesses, developed penalties for violators, and increased access to up-to-date beneficial ownership data.

Being listed on FATF meant that financial transactions between Zimbabwe and other countries got extra scrutiny to avoid “deficiencies” that may be used by money launderers and terrorist financiers. Because some banks consider these extra measures too costly, they find it easier to simply cut off the country.  

In August, Germany’s Deutsche Bank announced it would no longer offer US dollar transactions in Zimbabwe.

ALSO READ | New report lists Zimbabwe among economies with highest money laundering risk, and that’s bad news for local banks, economy

FATF: Relief, but not there yet

Finance Minister Mthuli Ncube had anticipated the lifting of the FATF measures this quarter, during his 2022 budget statement. This, he hoped, would result in “boosting investor confidence and making it easier for local banks to secure new correspondent banking relationships while retaining existing ones”.

But the FATF relief does not end Zimbabwean banks’ isolation.

Due to a combination of Western sanctions, Zimbabwe’s own poor regulation, and the currency crisis, the country has lost at least 102 corresponding banking relationships over the past decade, according to central bank.

International banks will remain wary of falling foul of US sanctions for handling Zimbabwean businesses. Leading banks such as Standard Chartered Bank plc and CBZ have previously faced penalties for transacting with entities sanctioned by the USA.

The FATF measures have been a sore point in African and EU relations. The African Caribbean and Pacific (ACP) has previously described the listing process as ‘unilateral and discriminatory’. Other African countries also previously listed by FATF – Ghana, Mauritius and Botswana – were also removed from the list at previous meetings.

ALSO READ | SPECIAL REPORT – US sanctions on Zimbabwe: truths, history, and lies