Martin Endjala
The Bank of Namibia has clarified its position amidst reports of South Africa’s greylisting by the Financial Action Task Force (FATF) stating that Namibia’s financial transactions with the rest of the world and capital flows to and from the jurisdiction will continue uninterrupted. This is despite the country’s ties and exposure to the South African financial system.
The Bank of Namibia Director Strategic Communications and International Relations, Kazembire Zemburuka, confirmed this in a statement in response to concerns raised by some economists and Namibians at large.
He said that as an independent and sovereign state, Namibia is going to great lengths to meet the deadlines in order to avoid the country from being greylisted after the current South African 12-month monitoring period expires.
Once a country is greylisted, the FATF closely monitors that country’s financial transactions and interactions with the rest of the world. It’s financial systems may suffer reputational damage, affecting foreign direct investment, and capital flows, and increasing compliance costs, Zemburukua stated.
However, Namibia is said to be already making steady progress in addressing findings related to its Anti- Money Laundering and Combatting the Financing of Terrorism and Proliferation Framework (AML/CFT/CPF) in order to maintain the integrity of its financial system.
This stems from the second peer review and mutual evaluation exercise the country was subjected to last year as part of the Financial Action Task Force framework.
Moreover, Namibia has shown significant political commitment to meeting the FATF requirements. To avoid greylisting, the cabinet has directed institutions and stakeholders to implement an Action Plan adopted in December 2022.
The proposed legislative changes have been made, and public consultations on the gaps in relevant laws that should be benchmarked to the best international standards are underway.
Enforcing applicable laws to combat financial crime Zemburukua said, is another area under scrutiny. “On this front, law enforcement agencies are working nonstop to reduce the risks of a targeted review. In this regard, the relevant laws must pass Parliament before the country’s post-Evaluation Progress Review Report is submitted at the end of July 2023”.
Meanwhile, Namibia is expected to demonstrate significant progress in addressing recommendations around the effectiveness of the national AML/CFT/CPF system. And the Cabinet is regularly updated on the progress in implementing the Action Plan.
With the addition of South Africa to the FATF’s list of jurisdictions subject to heightened scrutiny, BoN Governor Johannes !Gawaxab highlighted that the Financial Action Task Force framework suggests the risks of dealing with clients and transactions associated with or emanating from, jurisdictions on the list are increased.
As a result, relevant financial and non-financial institutions worldwide, including those in Namibia, must exercise increased caution when dealing with transactions or clients with ties to such jurisdictions.
Adding that this does not imply quitting or de-risking but rather taking the necessary precautions to reduce this risk to acceptable levels.
This Risk-Based Approach within the AML/CFT/CPF framework, informed by the FATF Recommendations the Governor stated that it remains the most effective risk management approach at the institutional level.
“The Bank of Namibia and the Financial Intelligence Centre (FIC) will continue to work with relevant institutions to ensure Namibia plays its part in maintaining a reliable international financial system”.
Furthermore, Notwithstanding these recent developments in the region,Gawaxab noted that he has seen countries close to home successfully exiting the heightened surveillance through resolute commitment and action from all stakeholders.
Therefore, asserting that Namibia is better positioned to safeguard its interests and protect its financial system because of the demonstrable political will and widespread support from all stakeholders.
“We are encouraged that investors regard Namibia as a safe investment destination, and the enforceability of our legal framework is undeniable, thanks to our strong institutions and independent judiciary. We reassure Namibians and our valued stakeholders all over the world of our commitment to fight financial crimes and, that our financial system is robust and will be in better shape at the end of these interventions”, the Governor maintained.
Meanwhile, Economist Ruusa Nandago said that at the moment the greylisting in South Africa is not expected to have large direct effects on Namibia’s economic fundamentals or financial stability.
She rather added saying that the impact of the greylisting in SA is expected to be predominantly at the institutional level where institutions engaging and financial transactions will have to increase their due diligence which will result in an increase in compliance costs.
Given that Namibia has not been greylisted, Namibian financial transactions will be viewed in that light, rather than in the light of SA greylisting. “The increased compliance costs will, however, factor in should Namibian entities use the SA financial system for transactions”, she opined.
In another interview, the Independent Economic and Business Researcher Josef Sheehama told this publication that from the economic viewpoint, the greylisting by the Financial Action Task Force will have a negative impact on South Africa’s economy.
The greylist will mean that South Africa will have to get serious in its fight against money laundering. This can cause serious impacts on investment activity.
This further means that the consumers would be subject to enhanced due diligence, which would increase the cost of doing business for local businesses and individuals trading internationally, and those with bank or investment accounts abroad.
Additionally, South Africa’s reputation will suffer from the negative publicity from the greylisting. This will affect South Africa’s international relationships in many ways, ultimately resulting in a reduced appetite for business relationships with South African partners.
Moreover, it will increase bureaucratic processes and higher compliance costs, a fall in investment and exports, and reputational issues.
The decision by the FATF to greylist South Africa Sheehama pointed out, will harm investor confidence and weaken the rand. “It will significantly impact international risk the profile and negatively affect trade between local financial institutions and their overseas counterparts”.
Other potential impacts would include a decline in foreign investment and possible de-risking, where banks end relationships with clients based in high-risk jurisdictions, essentially to save on significant compliance costs.
Going forward, the priority must be to get off the greylist as fast as possible. South Africa must make the most of it to catalyse the remedial action required to get a greylist.
Thus emphasising that the longer-term outlook and appropriate positioning towards local markets should continue to be driven by fundamental valuations and economic factors, including the prudence of monetary and fiscal policy, and political willingness to implement economic growth-friendly reforms.
