Compli-Serve, one of the country’s leading independent compliance advisories, says SA still faces a 60% likelihood of being greylisted before the end of February, even though two critical pieces of legislation were hurried through in late 2022.
President Cyril Ramaphosa signed into law two acts on December 30 in an effort to bolster the country’s ability to combat financial crime ahead of the Paris-based Financial Action Task Force’s (FATF) February 24 decision on whether to add SA to a greylist of countries deemed to have inadequate controls for anti-money laundering and combating the financing of terrorism.
The Protection of Constitutional Democracy against Terrorist and Related Activities Amendment Act and the General Laws Amendment Act were seen as crucial to avoid greylisting. But questions still remain over SA’s ability to enforce the laws effectively and prosecute transgressors.
“I remain fairly certain that we will get greylisted, but perhaps the 85%-15% split in agreement of a greylisting may be narrowing in [light of] the efforts we have made to address some of the deficiencies as outlined by the FATF,” said James George, compliance manager at Compli-Serve SA. “Perhaps 60%-40% would be more realistic as we approach D-Day,” he said.
“Just maybe SA can pull a rabbit out of the hat at this late stage, but I would be very surprised just given the sheer number of anti-money laundering and combating the financing of terrorism deficiencies in our apparatus versus some of the other countries and territories that are still greylisted.”
FATF, an intergovernmental body that assesses countries’ ability to combat illicit financial activity, initially gave SA 18 months to come up with a plan to address shortcomings in its ability to prevent financial crime. This was first outlined in an October 2021 report. SA authorities have been criticised for dragging their heels, but progress sped up in the second half of 2022 as the National Treasury pledged to perform a “miracle” to keep SA from being ranked alongside countries such as Syria and Myanmar.
S&P Global Ratings has said SA’s failure to pursue cases tied to state capture as well as efforts to cover up illicit cross-border payments were behind its poor anti-money laundering and combating the financing of terrorism scoring in the FATF’s initial assessment. The weakened capacity of the SA Revenue Service and the National Prosecuting Authority and governance gaps at state-owned enterprises contributed too. SA sent a senior delegation led by Treasury acting director-general Ismail Momoniat to meet the FATF in Morocco in January.
“I am aware that some hard hours have been put in by SA in presenting to FATF in Morocco,” George said. “Should FATF still feel there are recommended actions which need addressing, an action plan will be developed which will need to be implemented. The country is thus greylisted until the action plan is addressed and the shortcomings addressed.”
George remained concerned about SA’s ability to deliver on 11 immediate outcomes derived from the FATF’s initial assessment. “SA has created action plans for each immediate outcome,” he said. “Let’s just hope that we have done enough.”
Research firm Intellidex put the probability of SA being greylisted at 85% last October . But the firm’s global capital markets lead, Peter Attard Montalto, said it now seemed a “done deal” that SA would be greylisted.
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