Capitec on the threat of South Africa being greylisted

 ·22 Aug 2022

Capitec and the banking industry at large are planning for what a possible greylisting could mean for the South African economy.

Speaking at a media round table (19 August), Wim de Bruyn, Capitec’s chief information officer, said that the bank is actively working with the South African Reserve Bank (SARB) on avoiding a greylisting.

He added that the banking industry as a whole is doing everything it can and is cognisant of the new tweaks, enhancements and additional requirements that are being put in place to mitigate possible money laundering and terrorist financing in the country.

“If it were to happen, we are planning for what impact it may have,” said De Bruyn. Capitec, as primarily a retail bank, will, however, see less of an impact compared to banks that conclude lots of cross-border transactions.

Graham Lee, the group executive for Capitec’s retail bank division, added that the discourse around greylisting is dependent on what government wants to do.

He said that the new mechanisms of managing a possible greylisting relate to the criminal justice system and the ability of suspicious financial activity to be uncovered and prosecuted.

In July of this year, the SARB’s Prudential Authority warned banks within the country that they are at high risk of being used for financial crimes.

This follows a report by the international watchdog, the Financial Action Task Force (FATF), that identified significant weaknesses in parts of South Africa’s financial regulation.

The banking industry in South Africa is generally considered to be at high risk for money laundering, financing of terrorism, and proliferation financing (funding of nuclear or chemical weapons and their components), according to the Prudential Authority (PA). However, the greatest risk is concentrated at the top, among the five largest banks.

Cabinet has announced the approval of new amendment bills that seek to take on money laundering and terrorist financing in the country.

Recommendations made by the FATF are being addressed through amendments, in the form of bills, to the following pieces of legislation:

  • Financial Intelligence Centre Act;
  • Nonprofit Organisations Act;
  • Trust Property Control Act;
  • Companies Act;
  • Financial Sector Regulations Act, and;
  • The Protection of Constitutional Democracy Against Terrorist and Related Activities Act.

South Africa has until the beginning of October to show the FATF that there is a sufficient plan to address these shortfalls in order to avoid a greylisting that could make doing business in the country even harder – with more compliance steps required in certain transactions.

Analysts, economists and banking experts have warned that the actual outcome of the greylisting could see South Africa shut out of certain financial markets, which would have a negative effect on the wider economy as well as on consumer prices.

On Thursday (18 August), minister of finance Enoch Godongwana published an explanatory note on the General Laws (Anti-Money Laundering and Combating Terrorism Financing) Amendment Bill, which he aims to introduce to the National Assembly in the third quarter of 2022.

The bill makes amendments to four key financial acts, changing wording and responsibilities to better secure South Africa’s financial systems from money laundering and terrorism financing.

The acting director-general of the National Treasury, Ismail Momoniat, said that the bills are expected to be finalised by the end of this year.

“While it will take about three years to effect all necessary changes, the country must demonstrate that we’ve got a credible action plan,” said Momoniat.

Read: Massive changes on the cards for South Africa’s finance laws as greylisting draws near

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