South Africa’s mining industry faces money laundering problems

It is a move which could affect new mining opportunities for investors: On Oct. 18, 2025, South Africa was officially removed from the Financial Action Task Force’s (FATF) “grey list” of jurisdictions under increased monitoring for money-laundering and terrorist-financing risks. This decision marked the culmination of more than two years of reforms to strengthen the nation’s anti-money-laundering and combating the financing of terrorism (AML/CFT) systems. The FATF noted that South Africa had successfully implemented a comprehensive, 22-point action plan, demonstrating enhanced compliance with global standards.

While this development was widely interpreted as an improvement in financial governance and global credibility, its implications for the mining industry — perhaps South Africa’s most economically significant sector — are particularly noteworthy. The mining sector, especially gold and coal mining, has historically been embedded in broader discussions about illicit financial flows, money laundering, and regulatory enforcement. Strengthened AML systems can therefore meaningfully affect how capital moves through, into, and out of South Africa’s mining value chains.

South Africa’s mining industry has long been a cornerstone of the country’s economy. It is a major producer of gold, platinum, diamonds, and coal — commodities that historically drove industrial growth, export revenue, and employment. Large mining houses, such as Anglo American, Sibanye-Stillwater, and others remain internationally significant, while smaller and sometimes informal operations have proliferated in the face of economic pressures and regulatory challenges.

Despite its economic importance, the mining sector has been plagued by structural issues: declining output in some commodities, labour tensions, environmental concerns, and the rise of illegal mining and smuggling networks. Over the past decade, as high-grade deposits have matured or been depleted, criminal syndicates and informal groups — often referred to locally as “zama zamas” — have moved into abandoned or under-regulated shafts. These operations are commonly linked to broader criminality and, in certain contexts, money laundering.

Placement on the FATF’s grey list — to which South Africa was added in Feb. 2023 — had significant implications for the broader economy. Grey-listing signals that a country’s AML/CFT regime has strategic deficiencies that could be exploited by illicit actors. This status typically increases international compliance costs, prompts heightened due diligence by global banks and can reduce foreign investment.

For the mining sector, which is both capital-intensive and globally integrated, the consequences of grey listing can be quite material. For example,

International investors and banks often price compliance risk into mining finance decisions. Grey-listing can lead to higher borrowing costs or tighter due diligence requirements, particularly where cross-border financing is involved. Removing South Africa from the grey list may ease some of these burdens by signaling stronger AML oversight, potentially lowering the cost of capital and encouraging foreign direct investment in mining projects — from exploration to downstream beneficiation.

Illicit mining and smuggling of gold and other minerals have been linked to underground financial networks that exploit weak AML enforcement. These operations often obscure the proceeds of stolen or illicitly mined minerals through layering transactions, shell companies, and cross-border transfers. A stronger AML framework makes it harder for these networks to function, as financial institutions become more capable of detecting, reporting, and blocking suspicious transactions.

Mining companies operate within complex regulatory frameworks governing environmental compliance, labour relations, and export controls. The grey list had introduced uncertainty about financial regulation, with some observers warning that systemic weaknesses in oversight could undermine investor trust. Delisting, backed by demonstrable reforms, may help stabilize perceptions about South Africa as a legitimate and well-regulated investment destination for mining capital.

To better understand linkages between AML law enforcement and mining, consider some of the past cases and scandals that involved illicit financial flows tied to mining, resource smuggling, or financial crime.

One notable example involves a cross-border illegal coal mining operation in Mpumalanga province. In Jan. 2025, the National Prosecuting Authority’s (NPA) Asset Forfeiture Unit, working with financial intelligence authorities from Namibia, seized 52.5 million South African rands from bank accounts as the proceeds of alleged illegal coal mining and associated offenses (including money laundering). These funds were identified as part of broader unlawful activities tied to illegal extraction.

This case illustrates how illegal mining — beyond physical crime — often intertwines with financial crime. The illegal extraction of valuable resources generates cash that may be laundered through complex banking transactions to conceal its origin, avoid taxation, and fund further illicit activity. Robust AML enforcement enables law enforcement to disrupt this cycle by identifying and freezing the financial proceeds of environmental and mining crimes.

Historically, gold has been one of the most lucrative yet vulnerable commodities for smuggling and money laundering. Investigations into the so-called “Gold Mafia” operations revealed that some bank officials at major South African banks were implicated in laundering money in exchange for bribes — enabling criminal networks to move illicit gold proceeds out of the formal financial system.

These revelations highlighted weaknesses in AML controls within South Africa’s financial system, especially in monitoring transactions tied to resource-linked activities. The fallout from such schemes captured public attention and underlined why stronger AML frameworks are critical for preventing mining-linked financial crime.

Beyond specific criminal cases, trade mis-invoicing in mining — a practice in which the value of mining exports or imports is intentionally under- or over-reported — has been documented as a source of illicit financial flows out of South Africa. Studies have estimated large amounts of revenue lost because of mis-invoiced exports of minerals; such flows not only reduce government revenue but also facilitate capital flight and obfuscate the true economic contribution of mining.

The removal from the FATF grey list does not mean that money laundering and illicit financial flows have vanished from the South African economy. Rather, it reflects measurable institutional progress in dealing with these issues. But why is that progress so relevant to mining now and in the future?

Mining jurisdictions worldwide wrestle with illegal extraction, unsanctioned smuggling, and organized crime networks. As seen with the “zama zamas” phenomenon in abandoned gold mines, illicit mining can produce substantial revenues for criminal syndicates. These syndicates often leverage weak AML systems to launder money and integrate illegal profits into the legitimate economy. Enhanced AML controls make it harder for these criminal networks to monetize their activities, thereby strengthening law enforcement deterrence and reducing illicit markets.

Global investors increasingly incorporate ESG (Environmental, Social, and Governance) criteria into mining investment decisions. Poor AML performance can signal broader governance risks, potentially deterring capital inflows. By addressing its AML weaknesses, South Africa is better positioned to attract investors who demand transparency, ethical governance, and reduced exposure to reputational risk.

The FATF reform process emphasized not only improved reporting and monitoring but also the investigation and prosecution of complex money-laundering cases. In the mining context, this means that prosecutions and asset forfeiture actions — like the illegal coal mining proceeds seizure — become more feasible as law enforcement capacities strengthen. Over time, this creates a deterrent effect that makes resource-linked financial crime less attractive.

Despite its FATF delisting, South Africa’s AML journey is far from complete. The FATF requires continued demonstration of effective outcomes — including successful prosecutions and sanctions — to avoid re-listing in future evaluations.

In the mining sector, the following three major challenges remain:

• Illegal mining and violent criminal syndicates (particularly in abandoned gold fields) continue to pose risks both to public safety and to financial integrity.

• Trade mis-invoicing and illicit flows in mining exports still represent a substantial leakage of public wealth.

• Cases that span criminal, financial, and corporate law — such as collusion between banks and smugglers — underscore the need for ongoing vigilance.

To sustain progress, South Africa must reinforce AML capacities across law enforcement, regulatory agencies, and the private sector, particularly those institutions involved in mining finance and trade.

South Africa’s exit from the FATF grey list in 2025 reflects meaningful institutional advances in combating money laundering and terrorist financing. For the mining industry, this achievement has multifaceted implications: it enhances investor confidence, strengthens the legal flywheel against illicit financial flows tied to mining, and aligns the country more closely with international standards that influence capital flows in the sector.

Past cases involved illegal mining proceeds, gold smuggling networks, and trade-based financial crimes. These all sevre to highlight the deep interconnectedness of mining and AML enforcement challenges. The ongoing reforms offer a foundation upon which South Africa can protect a crucial economic sector from the corrosive effects of financial crime while positioning mining for sustainable and transparent future growth. 

Gordon Feller is a freelance mining writer.