Action plan to get off ‘greylist’
LAST week, South Africa was put on a “greylist” by the Financial Action Task Force (FATF) for falling short of certain international standards for the combating of money laundering and other serious financial crimes.
The FATF is a global body that aims to tackle global money laundering and terrorist financing. South Africa has been a member of FATF for the last 20 years due to our commitment to fight these criminal activities both at home and across the world.
The listing of South Africa as a “jurisdiction under increased monitoring” – commonly known as grey listing – has caused much concern about the state of our financial institutions, law enforcement agencies and investment environment. The situation is concerning, but less dire than some suggest.
We have gone through a rigorous process of addressing the issues that FATF has raised with us. The fundamentals are in place and we know what we need to do to get off the greylist. We are determined to do this as quickly as possible. This is important not only for our international standing, but also for our own ability to fight these crimes in our country.
Since the dawn of democracy in 1994 we have sought to build credible, independent institutions and implement effective laws to deal with complex financial crimes of this nature. We have also forged collaborative relationships with transnational entities and global bodies in the financial sector, including the FATF and Interpol. During South Africa’s last regular mutual evaluation of its measures to combat money laundering and the financing of terrorism, a number of deficiencies were identified.
The mutual evaluation was conducted in 2019, when the country was emerging from the state capture era, which had a particularly detrimental impact on institutions like the South African Revenue Service (Sars), National Prosecuting Authority (NPA) and the Hawks.
Since the results of the mutual evaluation were published in 2021, we have made great progress in addressing the identified shortcomings. Of the 67 recommended actions emanating from the mutual evaluation, we have successfully addressed all but eight strategic deficiencies.
For example, we have addressed significant weaknesses in our legal framework, through the enactment of amendments to laws on antimoney laundering and combating terrorism financing.
When it comes to developing world-class expertise, legislative reform and strengthening state institutions to combat complex financial crime, we have come a long way. This is notwithstanding deliberate attempts to erode the state’s ability to detect, investigate and prosecute such crimes during the state capture era.
We have restored credibility to key institutions like Sars and the NPA to enable them to fulfil their respective mandates. We have bolstered the powers of the Special Investigating Unit (SIU) by establishing a Special Tribunal to recover public funds stolen through corruption and fraud, and an Investigative Directorate in the NPA to investigate serious corruption.
Last week, Minister of Finance Enoch Godongwana announced in the Budget that additional funds will be allocated to the police, NPA, SIU and Financial Intelligence Centre (FIC) to strengthen the fight against crime and corruption.
One of our most effective tools for combating money laundering and other financial crimes is the multidisciplinary Fusion Centre we established in 2020. The Fusion Centre brings together bodies like the NPA, SIU, Sars, the Hawks, Crime Intelligence, the State Security Agency and the FIC. Since its inception the work of the Fusion Centre has led to the preservation and recovery of approximately R1.75 billion in criminal assets.
It is noteworthy that the strategic deficiencies identified by the FATF do not relate directly to the country’s financial sector. This means that financial stability and costs of doing business with South Africa will not be seriously impacted by the grey listing.
Partnerships between government and the financial sector have played a valuable role in efforts to address serious economic crimes. The South Africa Anti-Money Laundering Integrated Task Force was set up in 2019 as a partnership between the banking sector and government regulatory authorities. Between the beginning of 2020 and the end of March 2022 successful interventions by the Task Force led to the preservation of criminal assets worth R86 million.
Like all countries, we are dealing with the shifting sands of globalised crime and criminal syndicates. The challenge facing authorities is to anticipate criminal innovation and to respond swiftly and effectively.
As a country, we welcome the intensified monitoring by FATF. We have a focused action plan in place to address the remaining deficiencies identified by the FATF.
Most of these deficiencies relate to the implementation of our laws. For example, we need to be able to demonstrate, among other things, an increase in the investigation and prosecution of serious and complex moneylaundering and terrorism financing, an increase in mutual legal assistance requests to other countries, an increase in the use of financial intelligence by law enforcement agencies, and the effective implementation of targeted financial sanctions.
Our action plan to address these deficiencies is aligned with the work we are doing to implement the recommendations of the State Capture Commission as outlined in our submission to Parliament in October last year.
As a country that both values and enforces the rule of law, the greylisting is an opportunity for us to tighten our controls and improve our response to organised crime. This will ultimately place us on a stronger footing to effectively fight these damaging and dangerous crimes.
◆ The column has been edited.