South Africa\u2019s journey to remove itself from the Financial Action Task Force’s (FATF\u2019s) grey list requires significant corporate compliance improvements.<\/p>\n\n\n\n
And the government’s Financial Intelligence Centre (FIC) says that where these businesses don’t comply, they should expect to receive harsh sanctions as enforcement bodies continue to up the ante against them.<\/p>\n\n\n\n
This was emphasised at a panel discussion at the 11th Annual Tax Indaba on 9 September 2024.<\/p>\n\n\n\n
In February 2023, the FATF greylisted South Africa due to inadequate measures against money laundering, terrorist financing, and proliferation financing.<\/p>\n\n\n\n
Being on the grey list means the country must address strategic deficiencies within specified timeframes and is subject to intensified monitoring.<\/p>\n\n\n\n
The FATF has highlighted the need for South Africa to implement a robust strategy to counter terrorism financing, enhance anti-money laundering efforts, and improve the investigation and prosecution of complex financial crimes.<\/p>\n\n\n\n
Deputy Director-General of the National Treasury, Ismail Momoniat, noted that the greylisting reflects broader systemic issues beyond the financial sector. <\/p>\n\n\n\n
“The bigger issue is that we were greylisted because our law enforcement agencies were seriously weakened by state capture,” he said, pointing out that this led to ineffective investigations and prosecutions.<\/p>\n\n\n\n
Momoniat stressed that the problem extends to non-financial sectors such as legal practitioners and real estate agents. “We were particularly weak in the non-financial sector side of things,” he added.<\/p>\n\n\n\n
Christopher Malan from the FIC described the greylisting as a significant fall from grace, contrasting South Africa\u2019s previous role as FATF chair in 2005\/06 with its current status.<\/p>\n\n\n\n
The FIC, now responsible for overseeing non-financial services, issued directives in March 2023 requiring sectors like legal practitioners, estate agents, and trust service providers to submit risk and compliance returns (RCRs) by 31 May 2023. <\/p>\n\n\n\n
Yet, submission rates are still low: 60% for legal practitioners, 66% for estate agents, 74% for trust service providers, and 76% for company service providers. Only casinos met the deadline.<\/p>\n\n\n\n
Malan criticised the low compliance rates, especially in high-risk sectors like legal and real estate. <\/p>\n\n\n\n
“There is still a reluctance to file risk and compliance returns,” he said, highlighting the tendency of some professionals to delay compliance until faced with enforcement actions.<\/p>\n\n\n\n