FATF Grey-Listing Statement

Publication Date: 24/02/2023

The Financial Action Task Force (FATF) has placed South Africa on its grey list of jurisdictions subject to increased monitoring, due to concerns about its capacity to fight financial crime.

However, in its statement, FATF accepted that since its 2021 Mutual Evaluation Report (MER), South Africa has made significant progress on many of the recommended actions to improve its anti-financial crime systems, including developing stronger national anti-money laundering and terrorism financing policies.

While grey-listing can make it more onerous and costly to do business with South Africa and will detract from its reputation as an investment destination, it is important to note that FATF does not automatically call for the application of enhanced due diligence measures to grey-listed jurisdictions.

In its statement, FATF noted that in February 2023, South Africa made a high-level political commitment to work with FATF to strengthen the effectiveness of its anti-money laundering and terrorism financing regime. FATF will closely monitor South Africa’s progress in implementing this plan.
The Banking Association South Africa (BASA) will do whatever it can, with other public and private institutions, to successfully implement the remedial actions that have been agreed to. The priority now is to ensure that South Africa is removed from the grey list as soon as possible.

Much has already been achieved to fix weaknesses in the country’s anti-financial crime and terrorism funding capacity. The adoption of the Protection of Constitutional Democracy against Terrorist and Related Activities Amendment Act and the General Laws Amendment Act addresses the technical deficiencies in South Africa’s financial crimes laws. The General Laws Amendment Act is intended to, amongst other, ensure disclosure of the beneficial owners of companies, trusts and non-governmental organisations. Anti-financial crime legislation aims to prevent money laundering and illicit financial transactions and should not cause concern for legitimate businesses.

FATF has identified the lack of an effective ability to successfully investigate and prosecute cases of corruption and money laundering – and to render assistance to international authorities – as needing to be strengthened in South Africa. The allocation of R1,3 billion to the National Prosecuting Authority and to support the implementation of the recommendations of the State Capture Commission and FATF; and an additional R265,3 million to the Financial Intelligence Centre, must be effectively used to boost their anti-financial crime capacity. More assistance will likely be necessary, but government must strengthen the capacity for the justice system to investigate and secure convictions for financial crimes, or South Africa’s grey-listing by FATF will persist.

National Treasury has noted that there were no items on the national action plan that relate directly to preventative measures in respect to the financial sector. However, BASA and its members will closely monitor developments, which may affect their operations or their customers and clients. South African banks already follow global best practice, and they will not be shut out of international markets. Most of international correspondent banks already apply their own due diligence measures to South Africa.

Complying with the anti-financial crime requirements of FATF and other local and international authorities is necessary for the integrity and stability of the South African financial system and the country’s economy and people. The Zondo Commission of Inquiry into Allegations of State Capture, Corruption and Fraud in the Public Sector including Organs of State laid bare the devastation that financial crime inflicted on state enterprises, like Eskom and Transnet, the national fiscus and good governance in the country.

As the Minister of Finance, Enoch Godongwana, said in his budget announcement: “Addressing the FATF issues is part of the broader fight against corruption, crime, state capture and the deliberate weakening of the institutions of law and order in our country.” This will be to the benefit of all South Africans.