Greylisted SA is making progress

The latest report of the Financial Action Task Force, which greylisted SA earlier in 2023, indicates that the country has made progress in addressing technical compliance deficiencies in its anti-money-laundering system.

The latest report of the global Financial Action Task Force (FATF), which greylisted SA earlier this year, has indicated that SA has made positive progress in addressing technical compliance deficiencies in its antimoney-laundering system.

FATF greylisted SA because it found that the legislative regime and prosecutorial effectiveness in dealing with money-laundering and combating of terrorism financing were deficient.

In a statement on Wednesday the National Treasury welcomed the findings of FATF’s “South Africa: Follow-up Report on Technical Compliance Rerating”, published this week. It details SA’s progress in addressing the 20 technical compliance deficiencies identified by FATF.

The statement noted that at its October plenary FATF rerated 18 of the 20 deficiencies, based on progress made by SA authorities in the two years after FATF’s 2021 mutual evaluation report. “Of these, 15 were upgraded to be no longer deficient, as 14 (of FATF’s 40) recommendations (or standards) were now fully or largely compliant, and one recommendation was rated as not being applicable to SA. Following these reratings, SA is now deemed to be fully or largely compliant (or not deficient) in 35 of the 40 FATF recommendations, including in five of the six core FATF recommendations.

“This means that SA is left with five deficiencies in technical compliance (including three of the 18 which were upgraded from noncompliant to partially compliant), and two which remain as partially compliant since 2021).”

The Treasury said the publication of the follow-up report followed an application by SA authorities for the rerating of the 20 technical compliance deficiencies, following the enactment at the end of 2022 of two key laws: the General Laws (Anti-Money-Laundering and Combating Terrorism Financing) Amendment Act and the Protection of Constitutional Democracy Against Terrorism and Related Activities Amendment Act and related regulations that took effect in early 2023.

The Treasury statement noted a statement by FATF in the follow-up report that said “overall, the expectation is that countries will have addressed most, if not all, technical compliance deficiencies by the end of the third year from the adoption of their mutual evaluation report”.

The Treasury said that SA had addressed most of the technical compliance deficiencies within two years of the publication of its mutual evaluation report.

“The SA authorities continue to address the remaining five deficiencies, with the expectation that they will be deemed to be addressed in the next FATF Follow-up report in October/November 2024.”

Dealing with progress in dealing with the deficiencies in the investigation and prosecution of financial crimes, the Treasury said the FATF Follow-up Report does not address SA’s progress to improve the effectiveness deficiencies identified in the action plan agreed between the SA and FATF when SA was greylisted by the FATF Plenary in February 2023.

”Overcoming the effectiveness deficiencies is essential for SA to exit the FATF “greylist”. This assessment is a distinct process from addressing technical compliance,” said the Treasury.

It was also essential for SA to implement the agreed upon action plan. Among the requirements that SA will have to meet is to demonstrate a sustained increase in investigations and prosecutions of serious and complex money laundering cases. The country also needs to enhance its identification, seizure and confiscation of proceeds and instrumentalities of a wider range of crimes.

Also required is an update and implementation of a comprehensive national counter financing of terrorism strategy and an enhancement of the capacity of the relevant authorities, including the SA Police Service and National Prosecuting Authority.

The Treasury said that addressing the remaining actions within the agreed timelines will require a significant effort. The authorities will have to demonstrate that the improvements are sustainable, before SA will be deemed by FATF to have adequately addressed all the action items.