South Africa’s Progress to be Removed from the Greylist

Significant advancements have been made in South Africa’s framework for combating the financing of terrorism (CFT) and anti-money laundering (AML) more than a year after the country was placed on the Financial Action Task Force’s (FATF) greylist. Even with this development, more work needs to be done before South Africa is taken off the greylist.

 

At first, South Africa came under fire for failing to completely abide by international norms intended to prevent financing of terrorism, money laundering, and proliferation financing of weapons of mass destruction. The majority of the technical compliance issues with South Africa’s AML/CFT framework have been resolved, according to recent observations made by FATF assessors. Thirty-four of the forty FATF recommendations have been evaluated as either mainly compliant or compliant, with South Africa’s ratings having been upgraded for seventeen of the recommendations.

 

The FATF has noted the clear technical progress, but in order for South Africa to be taken off the greylist, this encouraging trend needs to continue and produce noticeable results.

 

Financial monitoring and compliance among Accountable Institutions are expected to be greatly improved by the 2022 changes to the Financial Intelligence Centre Act (FICA). By making these changes, the FATF report’s technological shortcomings will be filled, the Financial Intelligence Centre will have the necessary authority and responsibilities, and compliance expectations will be levelled.

 

Important phrases like “politically exposed persons,” “prominent influential persons,” and “beneficial owners” have been reinterpreted, along with expectations for risk management, compliance initiatives, and due diligence procedures for responsible institutions. The 2022 modifications also provide the Financial Intelligence Centre more authority and duties, such as enhanced access to data maintained by other governmental agencies or responsible organisations and the capacity to extend a directive not to move forward with a transaction.

 

According to a recent IMF research, the economic fallout from being added to the FATF greylist may cause a yearly decline in capital inflows equivalent to 7.6% of GDP. The fundamental lesson is that it is safer to avoid being on the greylist for an extended period of time, even though it may be too soon to assess the effects on South Africa.

 

Long-term gains result from taking South Africa off the FATF greylist and bolstering domestic efforts to combat money laundering and the funding of terrorism. A strong financial system is essential to a functioning economy. It must function with transparency and honesty.

 

The AML/CFT regime in South Africa is evolving quickly, and private sector oversight will only get more stringent. As a result, companies need to develop their internal compliance programmes in advance and be prepared to present flawless AML/CFT controls.

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