SA has not ticked all the FATF boxes, says Shamila Batohi

SA has made big advances in meeting the requirements of the international body that sets standards for combating of money laundering and terrorism financing, but there are indications that it has not yet ticked all the boxes, national director of public prosecutions Shamila Batohi has told parliament.

SA’s international reputation as having a financially secure regime will be in the balance next week when the Financial Action Task Force (FATF) holds a plenary in Paris which will decide on February 24 whether to put the country on a greylist of countries that fail to meet the required standards. This would put it in the same category as countries such as Syria and Myanmar.

SA sent a senior delegation led by the Treasury acting director-general Ismail Momoniat to meet the FATF in Morocco in January.

Greylisting will have severe consequences for the country as it will heighten its risk profile, add to the cost of doing business and negatively affect the correspondent relationships which SA banks have with their counterparts overseas.

Government departments and especially the Treasury have been frantically trying to have legislative framework amended since FATF released its mutual evaluation report in October 2021 which highlighted the deficiencies in the framework and in law enforcement. 

The Protection of Constitutional Democracy against Terrorist and Related Activities Amendment Act and the General Laws Amendment Act which address the legislative deficiencies were signed into law by President Cyril Ramaphosa in December.

The General Laws Amendment Act is intended to ensure disclosure and traceability of the beneficial owners of companies, trusts and nongovernmental organisations.

Weakened capacity

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 (NPA) and governance gaps at state-owned enterprises contributed too.

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.

Batohi and the NPA have been involved in working on SA’s response to the FATF report which highlighted the lack of prosecutions of money laundering and terrorist financing cases.

Batohi said in a meeting of parliament’s justice committee that SA had done a lot to avoid greylisting.

“When one thinks of how far we have come as a country from 2019 and considering that we were hit by Covid-19 in-between, (I think) what we have been able to do as a country and recently under the guidance of Treasury — because there are a number of government departments involved in this process — and certainly in terms of law enforcement, is nothing short of remarkable.

“But there is an indication that we will not tick all the boxes that FATF requires to be ticked but we are hoping that countries that vote on this at the end of the day will understand that grey listing SA at this point would perhaps be counterproductive to what FATF is trying to achieve.

“At the end of the day it is out of our hands but should we indeed be grey listed then we will need to work with other departments to make sure that SA gets out of grey listing as soon as possible,” said Batohi.

She said that there would be parts of the NPA budget that could be used for other initiatives if SA was not greylisted “but that is being rather hopeful”.

ensorl@businesslive.co.za