South Africa could miss a very important deadline
South Africa has made progress toward getting off the FATF greylist, but with limited time left to address the remaining non-compliant points, the country risks staying greylisted until 2026.
CDH’s Dispute Resolution Director, Marelise van der Westhuizen, and Associate, Loyiso Bavuma, explained that South Africa has made significant progress in fixing its non-compliance.
“National Treasury confirmed that South Africa now complies or largely complies with 37 of the 40 Financial Action Task Force (FATF) Recommendations, including complying or largely complying with all 6 core Recommendations,” they said.
In 2021, when the Mutual Evaluation Report was released, the country did not comply with half of FATF’s 40 recommendations.
The 2021 report concluded that although South Africa has a solid legal framework for combating money laundering and terrorist financing, significant shortcomings remain.
In particular, the country needs to pursue money laundering and terrorist financing in line with its risk profile, including by proactively seeking international cooperation, detecting and seizing illicit cash flows, and improving the availability of beneficial ownership information.
Authorities need to make better use of the financial intelligence products provided by South Africa’s financial intelligence unit. The country should also improve the application of the risk-based approach by obligated entities and supervisors.
Even though urgent legislation was introduced to avoid greylisting, it happened in February 2023.
“In February 2023, to be removed from the grey list, South Africa devised a 22-point action plan, each with a deadline,” van der Westhuizen and Bavuma added.
According to the National Treasury, only 6 of these points are still outstanding.
While five of the six remaining action points are due by January 2025, one point, concerning beneficial ownership, was due in September 2024.
Essentially, this point requires South Africa to show that authorities have quick access to accurate, up-to-date information on the actual ownership of legal entities.
The FATF found South Africa’s company and trust registries lacking in this area and, consequently, the National Treasury has urged trusts and companies to register their beneficial ownership with the Master’s Office and CIPC, respectively.
Missing the September 2024 deadline for beneficial ownership has added pressure for South Africa to meet the remaining January 2025 requirements to avoid staying on the greylist.
National Treasury’s guidance has already been implemented by domestic regulators.
The newly introduced Regulation 32A of the 2008 Companies Act now requires companies to maintain a register of individuals with a beneficial interest of 5% or more of the total securities.
Additionally, in August 2024, the Financial Intelligence Centre (FIC) issued PCC 59, van der Westhuizen and Bavuma said.
This publication “strongly recommends” that accountable institutions identify anyone holding at least 5% ownership in a legal entity, to be recognised as a beneficial owner under section 21B(2) of the FIC Act.
National Treasury, in closing, acknowledged South Africa’s progress in addressing the action items but emphasized that both regulatory authorities and relevant entities must sustain improvements to the country’s AML/CFT framework.
If South Africa successfully addresses all outstanding points in the next reporting cycle, the FATF Plenary in February 2025 will approve an onsite visit by the FATF Africa Joint Group, scheduled for May 2025, to assess the progress.
A positive outcome from this assessment would lead the group to recommend, at the June 2025 FATF Plenary, that South Africa be removed from the grey list.
Even though smaller African nations like Botswana, Mauritius, Morocco, and Zimbabwe have been delisted, South Africa has struggled to do the same, Peter Fabricius, Institute for Security Studies (ISS) consultant explained earlier this year.
Analysts have suggested that South Africa’s continued greylisting reflects a lack of political will and issues in prosecuting individuals linked to financial crimes and state capture.
While the National Treasury aimed to address outstanding deficiencies by October, this has not happened.
Although the hope is currently that South Africa will make it off of the greylist by June of next year, many experts believe South Africa may not be removed from the grey list until 2026.
Damage to law enforcement from past corruption scandals, such as state capture, has also weakened South Africa’s progress. Although the Treasury has made reforms, other departments lack the leadership required to ensure full compliance.
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