The Reserve Bank isn’t taking any prisoners

The South African Reserve Bank (SARB) has reaffirmed its fight against money laundering, and terrorism and proliferation financing in light of the recent greylisting.

According to the central bank, going forward, it will strengthen its supervision and further enhance the “dissuasiveness and proportionality of administrative sanctions issued,” – meaning tighter controls and bigger penalties for offenders.

The SARB has a zero-tolerance approach when addressing the abuse of the financial system by money launderers or terrorist financiers, it said.

Taking into account recent developments around South Africa being added to the FATF’s grey list, the SARB said it plans to monitor its financial jurisdiction with a more risk-based approach – implying more mitigation measures and acknowledgement of the possibility of financial crime occurring.

On 24 February, South Africa joined a list of jurisdictions lacking in sufficient regulation preventing money laundering and terror financing.

The listing comes after the government failed to implement all 11 recommendations by the Financial Action Task Force (FATF), a global financial watchdog, within the 12-month observation period.

Being greylisted has dire consequences for the country’s reputation within international markets, makes doing business with South Africa more time-consuming and has led to a decrease in the value of the rand.

Although mitigating a greylisting was primarily a duty of fiscal policy directed by the National Treasury and the government as a whole, the Reserve Bank was and remains a significant stakeholder in the process, particularly with regards to the banking sector.

“Since the FATF Mutual Evaluation of South Africa in October 2021, our coordinated government stakeholders have undertaken substantial and farreaching efforts, led by the National Treasury, to enhance our anti-money laundering, counter financing of terrorism and counter-proliferation financing (AML/CFT/CPF) regime and its implementation,” SARB said.

Under the mandate of the SARB, its Prudential Authority and the Financial Surveillance and National Payment System department are responsible for the overall AML/CFT/CPF supervision across all commercial banks, life insurers, mutual banks and more.

The FATF acknowledged some progress made by the Prudential Authority in assessing the financial risk associated with cross-border transactions. However, the bank is still set on improving.

“The SARB, just as the South African government, commits to further intensify its efforts to combat all manners of financial crime and ensure full compliance with global AML/CFT/CPF standards,” said the bank.

It added that the SARB’s initiatives enhance confidence and trust in the banking sector, which is essential to strengthening South Africa’s position as an international financial centre operating in sub-Saharan Africa.

In the central bank’s guiding document for its trajectory for the next handful of years, Vision 2025, it specifically references the FATF and the steps it intends to take to ensure AML and CFT mechanisms are efficiently implemented.

Under the fifth initiative, the bank will assess regulation and government practices and align them with relevant international standards.

Initiatives six and seven point to a drastic shift toward improving mitigation mechanisms. Initiative six aims for the bank to conduct a payments-wide risk assessment (including AML/CFT) and implement mitigation mechanisms.

Initiative seven involves the SARB establishing cybersecurity incident response teams for payment systems.

Read: SARB warns of triple blow for South Africans – including a ‘price spiral