SA makes some progress on exiting greylist

South Africa has addressed most of the technical compliance deficiencies that led to it being greylisted by the Financial Action Task Force (FATF) in February 2023, though much work still needs to be done to boost the effectiveness of legislation aimed at curbing money laundering and terror financing by improving the investigation and prosecution of such crimes.

That’s the word from National Treasury, which released a statement late Wednesday saying South Africa is now fully or largely compliant with 35 of 40 key recommendations made by the Paris-based to address previously identified deficiencies in its Anti-Money Laundering/Combating the Financing of Terrorism (AML/CFT) framework.

This follows a follow-up report published by FATF on 28 November titled "South Africa: Follow-up Report on Technical Compliance Re-rating", which showed that the county is left with just 5 technical compliance deficiencies it needs to address. These relate to AML/CFT measures related to cash couriers, non-profit organisations (NPOs), new technologies, national cooperation and coordination and targeted financial sanctions for terrorism and terrorist financing.

"South Africa has addressed most of the technical compliance deficiencies within two years of the publication of its Mutual Evaluation Report," National Treasury said in its statement. "The South African authorities continue to address the remaining five deficiencies, with the expectation that they will be deemed to be addressed in the next FATF follow-up report in October/November 2024."

FATF’s follow-up report provides an update on South Africa progress in addressing the 20 technical compliance deficiencies first identified in a 2021 Mutual Evaluation Report, which was compiled after an extensive review of the extent to which the country’s legal and AML/CFT framework complied with its 40 standards and whether laws and regulations are effectively implemented. The 2021 Mutual Evaluation Report found South Africa deficient on 20 key FATF recommendations or standards, giving the country three more years to address the issues as per the Paris-based organisation’s practice.

At the end of 2022 South Africa passed two key pieces of legislation - the General Laws Amendment Act and the Protection of Constitutional Democracy Against Terrorism and Related Activities Amendment Act and related regulations aimed at bolstering the country’s AML/CFT framework. After the laws came into effect in early 2023, South Africa’s authorities applied to FATF for the rerating of the 20 technical compliance deficiencies identified in its 2021 Mutual Evaluation Report.

On 27 October, the FATF plenary formally rerated 18 of the 20 deficiencies, based on the progress made by South Africa in the two-year period following the report. Of these, 15 were upgraded to be no longer deficient, with 14 deemed fully or largely compliant, and one rated not applicable to South Africa.

But while South Africa is now left with only five technical compliance deficiencies, Treasury acknowledged that the country still has much work to do in addressing its effectiveness deficiencies outlined in an action plan agreed between the organisation and local authorities when the country was first greylisted in February.

"Overcoming the effectiveness deficiencies is essential for South Africa to exit the FATF greylist," Treasury said. "This assessment is a distinct process from addressing technical compliance."

South Africa’s progress on the action plan agreed with FATF will be reviewed by the organisation’s Africa/Middle East Joint Group (FATF AME JG), which meets every four months. South Africa has reported on its progress against the action plan at two FATF AME Joint Group meetings in May and September 2023, and is currently preparing to engage on a third report.