KARABO MOKGONYANA: SA can learn from other African countries how to get off the greylist

SA was put on the Financial Action Task Force’s (FATF) greylist  on February 24 after falling short of international standards for the combating of money laundering and other serious financial crimes. This labelling of SA as a “jurisdiction under increased monitoring” has caused much concern about the state of our financial institutions, law enforcement agencies and investment environment. 

SA did poorly in its FATF mutual evaluation, which was conducted in 2019 when many domestic institutions were at their weakest following state capture. The government says there has been “significant” positive progress since the initial evaluation in 2019. For example, in an effort to address weaknesses in the legal framework, amendments to laws on money laundering and combating terrorism financing have been enacted. There has been legislative reform and strengthening of state institutions to combat complex financial crime through the state’s ability to detect, investigate and prosecute such crimes.

The government also maintains that it has restored credibility to key institutions such as the SA Revenue Service (Sars) and National Prosecuting Authority (NPA) to enable them to fulfil their respective mandates. This has been achieved by bolstering the powers of the Special Investigating Unit (SIU), including establishing a Special Tribunal to recover public funds stolen through corruption and fraud, and an Investigative Directorate in the NPA to investigate serious corruption.

Further, finance minister Enoch Godongwana announced in the recent 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. The government has also established a multidisciplinary Fusion Centre in 2020 to combat money laundering and other financial crimes.

The fusion centre brings together bodies such as the NPA, SIU, Sars, the Hawks, Crime Intelligence, State Security Agency and the FIC. According to government, since its inception the work of the Fusion Centre has led to the preservation and recovery of about R1.75bn in crime-related assets.

In an effort to address the eight areas of strategic deficiency identified by the FATF by January 2025, SA should learn from other jurisdictions on the continent that have been greylisted before and have subsequently been removed from the list, including Botswana, Mauritius, Zimbabwe and Morocco. SA will need to take a number of steps.

Though SA has adopted the General Laws (Anti-Money Laundering & Combating Terrorism Financing) Amendment Act and Protection of Constitutional Democracy Against Terrorism & Related Activities Amendment Act, it is more important to demonstrate whether there is, or will be, co-operation and, where appropriate, co-ordination between relevant authorities when implementing the provisions of these statutes. SA is good at adopting legislation to respond to emerging issues, but the country is not the best at putting effective systems in place to ensure effective implementation, monitoring and learning. The creation of effective regulatory bodies or units is going to be crucial to the effective implementation of these amendments.

Similar to Botswana, SA’s anti-money laundering/financing of terrorism legal and compliance framework needs to have targeted financial sanctions related to terrorism and terrorist financing and the proliferation of financial crimes in both the public and private sectors. Corporate criminal accountability and individual criminal liability need to be clear, and institutions need to comply with financial due diligence that should be set by government.

SA ought to better regulate virtual assets and virtual asset service providers by identifying and assessing the money laundering and terrorist financing risks emerging from such assets (bitcoin, crypto assets and virtual currencies) and the activities or operations of service providers, and whether the latter are required to take appropriate steps to identify, assess, manage and mitigate their money laundering and terrorist financing risks.

Similar to Mauritius, SA needs to enhance the transparency of legal persons and enlisted national co-ordination, as well as regional and international co-operation, which means authorities should be working closely together to combat money laundering and financial crime. A big part of that is increasing training, capacity and raising awareness to ensure all stakeholders are working in accordance with anti-money laundering/combat the financing of terrorism obligations.

The use of technology is going to be crucial. For example, Mauritius implemented an anti-money laundering/combating the financing of terrorism data collection system, which aims to continuously improve risk detection. SA needs to develop digital platforms or systems that identify, assess, manage and mitigate money laundering and terrorist financing risks.

Mauritius has improved the process of detecting threats of fraud, prosecuting criminals and confiscating illegal proceeds. SA ought to put in place better systems to enable the detection of fraud (in both public and private sectors), prosecution of criminals (especially those who hold public office) and confiscation of illegal proceeds. Though the Zondo state capture commission was a positive step to reveal the consequences of state capture, it is futile if there are no or few prosecutions of those implicated in corruption.

Some of the reforms Zimbabwe instituted that SA could adopt include developing a risk-based supervision framework for financial institutions and designated non-financial businesses and professions, including through capacity building among the supervisory authority and developing adequate risk mitigation measures for financial institutions. These include applying proportionate and dissuasive sanctions to breaches, creating mechanisms to ensure competent authorities have access to timely and up-to-date beneficial ownership information and addressing remaining gaps in the targeted financial sanctions framework.

In the case of Morocco, raising awareness in exchange offices to bring foreign exchange operators up to speed was the priority. The country brought structure to frameworks in foreign exchange operators and companies had to be helped to implement control procedures with internal control procedure guides. Another strategy that helped Morocco was building a strong international relationship with another country (Spain) that involved effective regulating and compliance and featured an anti-money laundering and financing of terrorism framework.

The most important step SA ought to take is to combat political instability and improve accountability in governance. The combating of money laundering and financial crimes requires governments and institutions that have the political will to put an end to this. Further, it requires ethical and law abiding leaders who are accountable.

• Mokgonyana is a legal & development practitioner with Re4m Envoy and Conflict Check focusing on intersectional human rights protection, effective implementation of international law and peace-building.