This is what South Africa needs to do to get off the grey list
The South African government has “noted” the Financial Action Task Force’s (FATF’s) decision to list the country as a “jurisdiction under increased monitoring” – or more commonly referred to as FATF’s “grey list”.
The FATF made its decision at the FATF Plenary meeting, which took place in Paris, France, on Friday, 24 February 2023.
According to the National Treasury, while the FATF recognized the significant and positive progress made by the South Africa in addressing the 67 recommended actions or deficiencies highlighted in its assessment of the country, more still needs to be done.
“Following engagements with FATF, it assessed that the country needed to make further and sustained progress in addressing the eight areas of strategic deficiencies related to the effective implementation of South Africa’s Anti-Money Laundering/Combating the Financing of Terrorism (AML/CFT) laws as set out in the FATF’s statement,” it said.
These action items requiring attention by South Africa were adopted by the FATF Plenary on 24 February 2023, and the country is expected to address these deficiencies by no later than the end of January 2025.
The eight areas of strategic deficiencies identified by the FATF require South Africa to:
- Demonstrate a sustained increase in outbound Mutual Legal Assistance requests that help facilitate money laundering/terrorism financing (ML/TF) investigations and confiscations of different types of assets in line with its risk profile;
- Improve risk-based supervision of Designated Non-Financial Businesses and Professions (DNFBPs) and demonstrating that all AML/CFT supervisors apply effective, proportionate, and effective sanctions for noncompliance;
- Ensure that competent authorities have timely access to accurate and up-to-date Beneficial Ownership (BO) information on legal persons and arrangements and applying sanctions for breaches of violation by legal persons to BO obligations;
- Demonstrate a sustained increase in law enforcement agencies’ requests for financial intelligence from the Financial Intelligence Centre for its ML/TF investigations;
- Demonstrate a sustained increase in investigations and prosecutions of serious and complex money laundering and the full range of TF activities in line with its risk profile;
- Enhance its identification, seizure and confiscation of proceeds and instrumentalities of a wider range of predicate crimes, in line with its risk profile;
- Update its TF Risk Assessment to inform the implementation of a comprehensive national counter financing of terrorism strategy; and
- Ensure the effective implementation of targeted financial sanctions and demonstrating an effective mechanism to identify individuals and entities that meet the criteria for domestic designation.
Minister of Finance, Enoch Godongwana said that the South African Cabinet has considered the Action Plan and committed to actively work with the FATF to swiftly and effectively address all outstanding deficiencies and strengthen the effectiveness of its AML/CFT regime.
Since the publication of its assessment in October 2021, the South African government has fast-tracked a number of laws and regulations to address many of the FATF’s recommended actions, including the speedy enactment of two major pieces of legislation – the General Laws (Anti-Money Laundering and the Combating the Financing of Terrorism) Amendment Act and the Protection of Constitutional Democracy Against Terrorism and Related Activities Amendment Act.
“Government recognises that addressing the action items will be in the interest of South Africa, and that doing so is consistent with our existing commitment to rebuild the institutions that were weakened during the period of state capture, the effectiveness of which is essential to addressing crime and corruption,” Treasury said.
“The action items as formulated in the Action Plan therefore form part of the broader commitment of the Government to combat financial crime, corruption and state capture, as announcement by President Ramaphosa in October last year in response to the findings and recommendations of the Zondo Commission on state capture.”
National Treasury noted that there are no items on the action plan that relate directly to the preventive measures in respect of the financial sector.
“This reflects the significant progress in the application of a risk-based approach to the supervision of banks and insurers. National Treasury therefore expects that the increased monitoring will have limited impact on financial stability and costs of doing business with South Africa.
“This will, however, be monitored closely. Importantly, the costs of increased monitoring will be substantially lower than the long-term costs of allowing South Africa’s economy to be contaminated by the flows of proceeds of crime and corruption.”
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