State capture, money laundering risks cited as reasons for SA greylisting

South Africa has been added to the Financial Action Task Force (FATF)’s “greylist,” which means the country will be under increased monitoring regarding actions against money laundering, terrorist financing, and proliferation financing.

FATF made its decision earlier Friday at its plenary meeting in Paris, France.

According to FATF, South Africa was found to be partially compliant or non-compliant with 20 of FATF’s 40 recommendations.

The watchdog identified 12 key findings and recommendations required to strengthen the South African financial system. It cited state capture, money laundering risks, law enforcement and judicial capacity as some of the key areas needing attention.

South Africa was given a year to report on the demonstrated progress that it has made to achieve the recommendations set out in the 2021 Report.

What Greylisting of SA means: Dr Azar Jammine

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Greylisting will make doing business with South Africa more difficult as new compliance steps need to be met. And the fear is that it could hurt the investment.

SARB commits to improving supervisory activities 

The South African Reserve Bank (SARB) says it has taken note of the FATF’s decision and has reaffirmed its strong commitment to disrupt money laundering and financing of terrorism among others.

“The decision is notwithstanding the substantial efforts by all stakeholders, under the National Treasury’s leadership, to address the recommended actions contained in the FATF Mutual Evaluation Report (MER) of South Africa, within the 12-month observation period.”

SARB says it has a zero-tolerance approach to addressing the abuse of the financial system by money launderers or terrorist financiers.

“Going forward, the SARB will further strengthen its supervision and further enhance the dissuasiveness and proportionality of administrative sanctions issued.”

Dawie Roodt, founder and chief economist of the Efficient Group, joins the discussion:

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South Africa’s 2021 MER highlighted a number of recommended actions linked to supervision and preventive measures applicable to financial institutions and designated non-financial businesses and professions.

The Treasury has also committed to working with the FATF and ESAAMLG to address deficiencies and strengthen the Anti-Money Laundering/Combating the Financing of Terrorism (AML/CFT) regime.