Greylisting presents opportunity to change SA’s ways

The Financial Action Task Force (FATF) plenary’s decision to adopt the report on SA Anti-money Laundering & Counter Terrorist Financing Measures, which was published in October 2021, means SA is now officially “greylisted”.

The FATF routinely conducts these evaluations to determine the extent of a country’s technical compliance with global anti-money laundering and counter-terrorist financing laws (AML/CFT).

The FATF evaluation is a searching one, assessing a country against 40 recommendations, which set out a comprehensive framework countries should strive towards to combat money laundering and terrorist financing. Different countries have vastly different legislative and administrative systems, so the recommendations are an aspirational framework and not a strict laundry list. The FATF evaluates a country and ultimately makes a value judgment on its technical compliance with the recommendations.

The SA report concluded that the country is partially compliant with 17 of the FATF technical recommendations, and totally non-compliant with three of them, painting a dire picture of the country’s ability to ensure safeguards in accordance with international standards for AML/CFT.  

Greylisting is not a process akin to international judicial proceedings, and the FATF does not impose penalties or sanctions on a greylisted country. Instead, being greylisted marks a country as being financially unsafe, in that it has inadequate safeguards against money laundering and terrorist financing (AML/CTF).

The financial and political costs associated with money laundering and terrorist financing are severe, and countries and organisations shy away from, or increase their own compliance requirements for dealing with countries that may be unable to prevent these crimes.

The decision to greylist SA follows the enactment of the General Laws (Anti-Money Laundering & Combating Terrorism Financing) Amendment Act and Protection of Constitutional Democracy Against Terrorist & Related Activities Amendment Acts, in 2022. These Acts sought to cure some of the deficiencies in SA's financial schema identified by the FATF. However, legislative amendments are not enough to overhaul the AML/CTF framework and detailed regulations that give effect to these laws must also be consistently implemented.

The FATF concluded in its October 2021 report that SA has a “solid legal framework for combating money laundering,” but that country needed to implement this system more effectively, through greater policing by financial authorities, and international co-operation with other FATF style regional bodies. The report specifically referred to the erosion of financial criminal prosecution and corruption, which has plagued the implementation of SA's AML/CFT laws. 

Although dispiriting, the greylisting by the FATF may yet present SA with opportunities for change. The country has applied for a reassessment of our AML/CTF laws by the FATF plenary in June. It is possible that we could see the rapid mobilisation of financial criminal action in this time, especially considering that finance minister Enoch Godongwana has announced that the Financial Intelligence Centre will receive R265.3m over the next three years to update the country's AML/CFT infrastructure.

If SA succeeds in getting itself removed from the FATF greylist, the country will do so with a revived approach to financial crimes and a far healthier financial environment for investors and South Africans alike.

• Rybko is a candidate attorney, and Perumall a partner, at Baker McKenzie Johannesburg.