Financial transactions to continue uninterrupted- BoN

Despite Namibia’s ties and exposure to the South African financial system, which recently got greylisted by the Financial Action Task Force (FATF), Namibia’s financial transactions with the rest of the world should continue uninterrupted, the central bank said.

Fin24 recently reported that greylisting is expected to hike the cost of doing business in South Africa by increasing the amount of due diligence companies have to carry out.

South Africans may also find sending funds offshore and transacting with international banks more difficult.

“The Financial Action Task Force (FATF) decision to put South Africa on the grey list signals to global banks, financial institutions and investors that the country is not fully compliant with anti-money laundering and terrorist financing standards.”

The move puts South Africa in the company of countries such as Syria, Haiti, Yemen and Mozambique, Fin24 reported.

The Bank of Namibia noted that Namibia is going to great lengths to meet the deadlines in order to avoid the country from being greylisted after the current 12-month monitoring period expires. If the country is greylisted, the FATF will closely monitor the country's financial transactions with the rest of the world. When this happens, the country's financial system may suffer reputational damage, affecting foreign direct investment, capital flows, and increasing compliance costs.

Central bank governor Johannes !Gawaxab said: "Notwithstanding these recent developments in our region, we have seen countries close to home successfully exiting the heightened surveillance through resolute commitment and action from all stakeholders. 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."

Impact

According to economic analyst Josef Sheehama, the Namibian economy is closely linked to South Africa, with the Namibian dollar pegged one-to-one to the South African Rand. Currency peg is dangerous for it can produce the wrong political and economic implications.

Greylisting may hinder the Namibia economic growth and development. Furthermore, the global correspondent banks involved in transactions with South Africa and Namibia’s entities are likely to demand a higher level of due diligence. This is positive in that it will necessitate greater documentation and transparency within countries financial system, helping to improve AML/CFT practices in general. However, banks will have to enhance their own compliance procedures.

“This will affect crossborder capital flows, especially for the trade sector. Documentary requirements for export and import payments, such as letters of credit, may become more challenging to fulfil, potentially raising costs and hampering business for companies engaged in trade. These changes will make Namibia and South Africa's foreign-exchange control regime more restrictive, although we do not expect this to create any major barriers to ongoing trade and investment flows for the economy as a whole,” Sheehama said.

“It is important to take note that what is good for South Africa is good for Namibia. It is unfortunate that greylisting by FAFT will directly or indirect affect us due to the currency peg,” he [email protected]