South Africa’s National Treasury said on Friday that it expected increased monitoring by the Financial Action Task Force (FATF), a global financial crime watchdog, to have a limited impact on financial stability and costs of doing business with South Africa.
This comes as the FATF labelled South Africa and Nigeria under its greylist, which puts the countries under special scrutiny to implement standards to prevent money laundering and terrorism financing.
Paris-based FATF said the two countries were added to its list following a review.
Being added to the greylist is a reputational knock for the South African government, which has been trying to address shortcomings identified by the FATF.
The Treasury further said that the costs of increased monitoring will be lower than the long-term costs of allowing the economy to be contaminated by proceeds of crime and corruption.
The South African Reserve Bank (SARB) meanwhile, said it acknowledges the decision made by the FATF to add the country to the list of jurisdictions currently under increased monitoring.
“Going forward, SARB will further strengthen supervision and enhance the dissuasiveness and proportionality of administrative sanctions issued,” the Reserve Bank stated.
SARB further stated that it reaffirms its strong commitment to disrupt money laundering, the financing of terrorism and proliferation through the enhancement of its supervisory activities.
Momentum Investments economist Sanisha Packirisamy, told Business Report that when the global FATF places a jurisdiction under increased monitoring (ie the greylist), it means that the country is actively working with the FATF to address apparent strategic deficiencies in its regimes designed to tackle financial crimes.
“In our view, much of the responsibility for the weakening of South Africa’s (SA) criminal justice system lies with the previous administration’s subversion of democracy. During this period, the capacity of SA’s tax authority, intelligence agencies and crime-fighting and law enforcement bodies were incapacitated. SA was given until November 2022 to prove it is remedying the country’s structural deficiencies when it comes to anti-money laundering and countering the financing of terrorism,” she said.
“We believe this yellow card warning should serve as a wake-up call for SA policymakers, regulators and law enforcement agencies to convince the country’s international counterparts it is worth their effort to maintain relationships in the interim as SA continues to build a more robust legal and compliance framework to remain competitive on the global stage,” Packirisamy further said.
The Financial Sector Conduct Authority (FSCA), on Friday, said, “The FATF recognised the significant progress made by South Africa to remedy shortcomings in the country’s efforts to combat financial crime since the publication of its Mutual Evaluation Report (MER) in October 2021. However, both the FATF and South Africa acknowledge that further improvements are still required in some areas.”
The FSCA further stated that it appreciated the consultative process adopted by the FATF and respected the decision that has been taken.
“Since the Mutual Evaluation, the FSCA has worked closely with other key stakeholders, including the South African Reserve Bank (SARB), Financial Intelligence Centre (FIC) and the National Treasury, to strengthen its oversight of anti-money laundering (AML) and counter-terrorism financing (CFT) risks in the financial sector. These coordinated and substantial efforts, led by the National Treasury, have resulted in many of the key deficiencies relating to the supervision and prevention of AML/CFT risks in the financial sector being addressed in a relatively short period of time,” the FSCA said in a statement.
The FSCA is the market conduct regulator of all financial institutions in South Africa.
It is the authority responsible for the AML/CFT supervision of financial services providers (FSP), asset managers and collective investment schemes (CIS). As such, it plays a vital role in safeguarding the integrity of, and preserving public trust in, South Africa’s highly interconnected financial systems.
"The things that pertain to our mandate as the FSCA have largely been attended to. So as an authority in charge of supervising the conduct of financial players in SA, we are satisfied that our systems and processes are rigorous enough to monitor local players as required by FATF. Of course, our work can only be effective and yield meaningful outcomes if all our partner institutions in the system work together. I’m encouraged to say that much progress has been made in this regard, and we will continue to pull together to address whatever gaps may still exist in our value chain,” the FSCA Commissioner Unathi Kamlana said.
“We remain more committed than ever in our supervisory efforts to combat money laundering and terrorist financing and to dissuade criminals who aim to misuse South Africa’s financial system for nefarious purposes. We will continue to work closely with the Interdepartmental Committee on AML/CFT led by National Treasury to strengthen South Africa’s fight against financial crime,” Kamlana further added.
BUSINESS REPORT