President Trump took the world by surprise when he cut off U.S. foreign aid to South Africa earlier this year. In a February executive order, he cited Pretoria’s “aggressive positions towards the United States and its allies, including accusing Israel, not Hamas, of genocide in the International Court of Justice, and reinvigorating its relations with Iran to develop commercial, military, and nuclear arrangements.”
Missing from the order, however, was any reference to South Africa’s role as a global hub of corruption and illicit finance.
That omission matters. Once viewed as a symbol of hope and freedom under the leadership of Nelson Mandela, South Africa has become a permissive environment for America’s adversaries. China, Russia, Iran, and terrorist groups such as Hamas now look to South Africa as an ideal jurisdiction for laundering money, moving weapons and undermining U.S. and allied interests.
If Trump wants to sustain pressure on Pretoria, he should use every tool available. That includes leveraging America’s influence at bodies such as the Financial Action Task Force, an intergovernmental watchdog for money laundering and terror finance, where decisions are taken by consensus and American pressure can be decisive. Placement on the group’s “grey list” signifies increased illicit finance risk, meaning banks and businesses typically approach listed countries with more caution and often reduce investment in those jurisdictions.
The Financial Action Task Force placed South Africa on its “grey list” in 2023 because of the many glaring and dangerous deficiencies in the country’s efforts to counter illicit finance. Systemic failures in the country’s ability to prosecute complex money laundering and corruption cases paved the way for growing risk to the global financial system.
At next month’s plenary session, task force members will decide whether to remove South Africa from the grey list. The answer should be no. Removing Pretoria now would send the message that the global system tolerates exactly the kinds of failures that the task force exists to correct — namely weak prosecutions, political interference and unchecked corruption.
South Africa was grey-listed to force reforms upon the country’s systemically corrupt government and financial institutions. The “state capture” years of President Jacob Zuma from 2009 to 2018 resulted in the lengthy Zondo Commission report, which identified hundreds of individuals and entities in South Africa implicated in corruption. Yet little has changed.
Of the 95 top officials in South Africa’s historically dominant African National Congress party who were named in the Zondo Commission, not one has faced meaningful repercussions in court. South Africa’s National Prosecuting Authority remains unable to prosecute complex financial cases, despite the overwhelming body of evidence from the commission and other state inquiries related to corruption and money laundering.
Beyond creating a permissive environment for transnational crime and other malign influences, high levels of corruption have brought about general economic malaise and youth unemployment running higher than 60 percent.
Meanwhile, crime — including street crime and organized crime, as well as white-collar crime — is estimated by the World Bank to have cost the South African economy up to 10 percent of its GDP in 2023, and it continues to drive away investment. The Financial Action Task Force grey-listing process is meant to keep pressure on governments facing precisely these conditions, yet South Africa’s limited reforms have been largely mere technical fixes.
Crime comes from every angle in South Africa. Illegal mining feeds a multibillion-dollar shadow economy, laundered through gold exports. Drug cartels use South African ports as transit hubs for cocaine and heroin. Chinese, Nigerian and Eastern European crime syndicates exploit the same weaknesses. The Financial Action Task Force has long warned that countries with entrenched organized crime demand heightened scrutiny, but South Africa remains dangerously deficient in this regard.
Pretoria also turns a blind eye to terror financing. The African National Congress party maintains close ties to Hamas, while groups linked to the terrorist organization, such as the Al-Quds Foundation of South Africa, continue to operate freely and fundraise with impunity. Meanwhile, a U.S.-sanctioned Islamic State cell leader attempted to form an Islamic State of Africa political party earlier this year.
With porous borders and weak oversight, South Africa has become a haven for extremist networks to launder funds and facilitate the financing of terrorism. These are exactly the illicit finance concerns that the Financial Action Task Force monitors, and that it demands governments bring under control before being allowed back into good standing.
South Africa’s institutions are not set up for success. Prosecuting authorities and financial intelligence services lack resources and political backing. Meanwhile, banks implicated in money laundering face minimal penalties, while courts remain overloaded and politicized. Last month, the police minister was suspended for allegedly shutting down an investigative unit probing political murders. Nearly 150 municipal employees have been assassinated since 2018, many for exposing corruption and illicit finance. What’s more, five prosecutors have been murdered in South Africa in the last five years alone. Attempts at accountability now kill in Africa’s most developed economy.
Officials in South Africa will claim they have done just enough to meet the task force’s benchmarks. But removing South Africa from the grey list now would be a gift to kleptocrats, terror financiers and organized criminals alike.
This is where Trump’s leadership matters. He has already shown he is willing to hold South Africa accountable by cutting aid and calling out its embrace of Iran and Hamas. He should now use the task force to tighten the screws and defend the global financial system from South Africa’s growing risks.
Max Meizlish, a former sanctions official at the U.S. Department of the Treasury, is a senior research analyst for the Center on Economic and Financial Power at the Foundation for Defense of Democracies, where Elaine K. Dezenski serves as senior director. She is also a former Department of Homeland Security deputy and acting assistant secretary.
