D-Day for South Africa

 ·9 Jan 2023

South Africa is fast approaching the critical deadline set by the Financial Action Task Force (FATF) and will soon know whether it will be added to the global grey list or not.

South Africa underwent a mutual evaluation of its anti-money laundering and combating the financing of terrorism (AML/CFT) system by the FATF between April 2019 and June 2021, with the final report being finalised and published in an October 2021 Mutual Evaluation Report.

Failing to sufficiently address the shortcomings found in the report would lead to South Africa being greylisted by the FATF, which would hold significant consequences for businesses and the government’s efforts to draw investment and conduct operations internationally.

Treasury that it is currently engaged in various follow-up processes with the FATF, with a face-to-face meeting set with the authorities this week (13 January).

South Africa will be represented at the meetings by a delegation of officials drawn from the National Treasury, various departments and investigative units as well as the the National Prosecuting Authority and SARS.

“The meeting will give the South African delegation the opportunity to engage with the FATF Joint Group, and to respond to any further queries which the FATF Joint Group might have,” Treasury said.

South Africa will also present to the FATF on the progress made in addressing the deficiencies that were identified by the group.

The group will report to the FATF’s International Co-operation Review Group (ICRG) on the progress that South Africa has made in addressing the deficiencies, before the ICRG makes a final recommendation to the FATF Plenary ahead of its meeting of 22-24 February 2023.

South Africa’s response

Since the publishing of the report, the South African government and its authorities have been fast-tracking legislation to address the 20 deficiencies that were identified. According to National Treasury, part of the remedial efforts included amending six laws that are key to the effectiveness of South Africa’s AML/CFT measures.

President Cyril Ramaphosa recently enacted these new finance laws for the country in a bid to avoid the greylisting – including the General Laws (Anti-Money Laundering and Combating Terrorism Financing) Amendment Act No 22 of 2022 and the Protection of Constitutional Democracy Against Terrorism and Related Activities Amendment Act No 23 of 2022.

The General Laws Amendment Act was assented to by the president on 22 December 2022, and the POCDATARA Amendment Act was assented to by the president on 23 December 2022. Both were published in the Gazette on 29 December 2022.

Enacting these laws is a significant step towards addressing the deficiencies in South Africa’s AML/CFT measures that were identified by the FATF in 2021.

The new finance laws enacted by the government were designed to strengthen the fight against corruption, fraud and terrorism, and also assist South Africa in meeting the international standards on AML/CFT, and to reduce the prospect of greylisting, Treasury said.

The POCDATARA Amendment Act amends the Protection of Constitutional Democracy Against Terrorism and Related Activities Act, 2004 by strengthening its provisions and expanding it to include aspects such as cyber-terrorism.

These amendments also address two key findings of the mutual evaluation by refining the offence of terrorist financing and improving the processes for the implementation of financial sanctions against supporters of terrorist organisations.

The POCDATARA Amendment Act commenced on 4 January 2023.

The General Laws Amendment Act amends five different Acts, namely:

  • Trust Property Control Act, 1988,
  • Nonprofit Organisations Act, 1997,
  • Financial Intelligence Centre Act, 2001,
  • Companies Act, 2008 and
  • Financial Sector Regulation Act, 2017.

According to Treasury, these amendments address 15 of the 20 deficiencies relating to the adequacy of laws and legal frameworks related to the 40 FATF Recommendations that were identified in the mutual evaluation report.

The remaining five deficiencies will be or have been addressed through non-statutory initiatives, it said.

Read: Start date for South Africa’s new finance laws – with more to come in 2023

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