‘Getting off greylist tough but doable’
More financial crime prosecutions crucial, says Treasury deputy DG Ismail Momoniat
The fact that nobody named in the Zondo report into state capture has yet been successfully prosecuted is a big concern
National Treasury deputy director-general Ismail Momoniat believes South Africa can meet a 10-month deadline to provide tangible evidence to the Financial Action Task Force (FATF) that it is combating money laundering and terrorist financing.
“It’s going to be extremely tough, but it’s doable”, says Momoniat, whose term at the Treasury has been extended so he can lead the project to get the country off the global financial crime watchdog’s dreaded greylist.
When South Africa was put on the list in February 2023 it was given two years to be seen to have addressed 22 items remaining from an original 67 flagged by the FATF in 2019. So far it has addressed five and made “good progress” on 14.
“Among the biggest challenges is for us to demonstrate a sustained increase in investigations and prosecutions for serious and complex money laundering, in particular involving professional money laundering networks and third-party money laundering.”
A related requirement is for South Africa to demonstrate a sustained increase in the effective identification, investigation and prosecution of terror-financing activities.
In a blistering interview with Business Times 18 months before South Africa was greylisted, Momoniat flagged the lack of information sharing between the Financial Intelligence Centre (FIC), the National Prosecuting Authority (NPA), the police, the South African Revenue Service (Sars) and the Treasury as a major impediment to the successful investigation and prosecution of complex financial crimes such as money laundering.
“It’s happening to a far greater extent now,” he says.
Key authorities are talking to each other. “We are seeing people asking many more questions, and getting information.”
But rules still have to be complied with. Sars can’t provide critical tax information to any of the other authorities, for instance.
“So there are limitations on how and to what extent information is shared.”
Isn’t much of this information key to addressing the FATF’s concerns about money laundering and terrorist financing? “I think it can be shared with the criminal justice authorities when Sars is ready to refer a matter for criminal investigation. But it’s not an unfettered right, it’s got to fall within the tax legislation. The question is, when we know there ’s crime can we not ensure it is easier to share information?”
The challenge is to make sure that when such information is shared it’s not abused, he says.
Don’t such challenges make it highly unlikely South Africa will meet the
February 2025 deadline?
It’s not going to be easy, Momoniat says. “Some of the challenges we face, given where we are, are really tough.”
He cites the FATF requirement for the South African Police Service to demonstrate a sustained increase in proactive requests for information from the FIC.
“It can’t be an ad hoc process, it must be ingrained in their operating procedures. There must be a mechanism for them to get such information quickly.”
The SAPS and NPA have always had access to FIC information, but how it is used needs to be improved so they can get convictions, he says.
Though the Treasury is in charge of getting the country off the greylist, they can’t interfere with what the NPA is doing.
“If they say they can’t get information from someone, all we can do is ask why they’re not providing information. We can’t influence what kind of information, how it is accessed or what use is made of it to secure successful prosecutions.”
The NPA also has to demonstrate a sustained increase in requesting information outside South Africa, known as a mutual legal assistance request (MLAR).
Momoniat says there has been “a significant improvement, so I’m hopeful we’ll meet the concerns FATF has on that score”.
To do so the NPA will have to demonstrate they’ve made at least 10 or 15 MLARs involving complex and serious money laundering cases, such as those involving the Guptas.
Whether the information they access turns out to be enough to get them back to South Africa to face criminal prosecution “only the NPA knows”, he says.
Would it have a bearing on our chances of getting off the greylist?
The FATF doesn’t go into specific cases, but when Momoniat’s team attend their next four-monthly FATF progress review in June they will be asked: “You raised this case, has it reached a prosecution stage? If not, why is it taking so long?”
The FATF are less interested in particular cases than in the trend. “We’ve got to demonstrate we’ve got more investigations and more prosecutions and that there’ sa sustained increase from quarter to quarter. They want to see an upward path, then they’ll assess us to see if the things we’ve said are improving actually have improved.”
So it’s in South Africa’s interests that the NPA deal with the Gupta case speedily, he says.
There are also requirements relating to the non-financial sectors that have never been heavily regulated, such as legal practitioners, estate agents and precious stone dealers. Supervising these sectors, which offer great opportunities for money laundering and terror financing, has just started, and it’s a tough challenge, he says.
“We’re making good progress, but the question is whether it’s enough. The compliance rate is not what we’d like, they’re not submitting returns. It’s a culture change for these sectors, they’re not used to doing anti-money laundering measures.”
If South Africa meets the February deadline the FATF will make a site visit in April or May 2025. If they’re happy with what they see they’ll take the country off the greylist in June 2025. Most analysts say 2026 is the best that can be hoped for.
The fact that nobody named in the
Zondo report into state capture has yet been successfully prosecuted is a big concern for Momoniat. “The worry with SAPS and the NPA is: do they have enough capable people? If not, is it because they’re being undermined or lack skills?
“That’s something only the NPA can answer. But to those of us on the outside it’s clear there need to be more prosecutions, otherwise we’re not going to get out of greylisting. But it’s not only the police and NPA, there are lots of agencies that have to do more, quicker.”
Because the impact of greylisting was factored in by the markets the consequences have seemed less dire than predicted, which might have led to less urgency about getting off.
“If we become complacent we won’t get off greylisting on schedule.”
And the longer South Africa stays on it the more costly the consequences will be.
“It’s a bad list to be on.”