A new report by the Financial Action Task Force shows South Africa is making progress in its efforts to be removed from the global watchdog’s dirty-money watchlist, the National Treasury said.

South Africa was placed on the so-called grey list in February by the FATF to denote the country’s shortcomings in tackling illicit financial flows and combating terror financing. The impact is still being felt, with the European Union adding South Africa to a group of high-risk countries in May.

A FATF report showed it has formally re-rated 18 of South Africa’s 20 deficiencies, the Treasury said in a statement on Wednesday. Of these, 15 were upgraded to be no longer deficient, 14 recommendations had been fully or largely complied with and one was rated as not being applicable to South Africa.

“Following these re-ratings, South Africa is now deemed to be fully or largely compliant” in 35 of FATF’s 40 recommendations, including five of the watchdog’s six core recommendations, the Treasury said.

South Africa’s addition to the grey list followed an era of endemic corruption — referred to locally as state capture — during former President Jacob Zuma nine-year rule that’s estimated to have seen the looting of at least R500 billion in taxpayer funds. Its inclusion requires that financial transactions with a South African component are subject to enhanced due diligence.

“While the immediate impact is higher processing, monitoring and reporting costs, the long-term consequence will be the reduction of South Africa’s attractiveness as an investment destination,” the central bank said in its latest Financial Stability Report on Wednesday. “However, the risk is mitigated by the resilience of the financial sector, compliance with international regulatory standards and the efforts being made to address the adverse findings of the FATF.”

The Paris-based body has given South Africa until the end of January 2025, to address the shortcomings.

Meeting the remaining targets will require “a significant effort” from all relevant authorities in South Africa, the Treasury said.