Finance minister Enoch Godongwana is being far too optimistic in predicting that SA will be removed from the Financial Action Task Force’s (FATF) greylist by mid-2024.
That much is clear based on the views of FirstRand CEO Alan Pullinger, who says SA faces two to three years on the financial greylist, while one of the country’s leading compliance advisories says it may take up to five years to be removed.
Godongwana told Moneyweb he was “quite sure” SA would be removed by mid-2024 despite a National Treasury fact sheet on its website suggesting it could take up to three years.
“It’s not going to be a year. I’m going to say it’s two to three years,” Pullinger told Business Day. “I don’t think it’s one year, even if we had to pull out all the stops — which I don’t think we’ll be able to do.”
On February 24 the Paris-based FATF, a global body that sets standards for anti-money-laundering and counterterrorism financing controls, placed SA on its greylist of 25 countries. That means SA joins the ranks of Albania, Syria, South Sudan and Yemen in being regarded as having insufficient measures in place to combat financial crimes ranging from funding terrorism to proliferation financing.
“Unfortunately, once you get onto this list you fall onto FATF’s schedule,” said Pullinger. “It’s not as if they meet every month.”
Each FATF plenary year begins in July and ends in June the following year. During that 12-month period, the FATF holds three plenary meetings, which typically take place in October, February and June. Removal from the greylist occurs only after a final, on-site assessment when both FATF and the relevant country agree that all elements of a specific action plan have been largely or fully addressed.
The FATF is scheduled to begin its next round of mutual evaluations of countries’ anti-money-laundering and counterterrorism financing controls frameworks in mid-2024, with the first reports from this round of assessments due for discussion at the organisation’s October 2025 plenary meeting. That suggests the earliest likelihood of SA escaping the FATF greylist is 32 months from now.
James George, a manager at Compli-Serve SA, one of the country’s leading independent advisories to financial services firms on compliance matters, also believes Godongwana’s one-year prediction is far too optimistic. “Unless the government and private sector really work hard together, it could take as long as five years. For me we are looking at three to five years as things stand.”
SA’s immediate focus will be to address eight deficiencies identified in FATF’s action plan, which starts with demonstrating that local authorities and financial institutions have provided sustained assistance to outbound requests for assistance with money-laundering and terrorist-financing investigations.
SA has to improve risk-based supervision of designated nonfinancial businesses and professions, such as estate agents, precious metal dealers and jewellers, while demonstrating effective and proportionate sanctions for noncompliance.
It also needs to ensure that authorities have timely access to accurate and up-to-date beneficial ownership information on legal persons and arrangements with sanctions imposed for violations. A sustained increase in law enforcement agencies’ requests for financial intelligence for money-laundering and terrorist-financing investigations must also be proven.
FATF expects to see a sustained increase in investigations and prosecutions of serious and complex money-laundering and terrorist-financing cases along with the identification, seizure and confiscation of proceeds of a wider range of predicate crimes (for example, bribery, blackmail and illegal gambling).
SA’s terrorist financing risk assessment framework needs to be updated so that a national counterterrorism-financing strategy can be implemented. Targeted financial sanctions and mechanisms to identify individuals and entities that meet the criteria for domestic designation are also required.
“I think some of the smaller items we can knock off quite quickly but here are some chunkier ones that are going to be tough,” Pullinger said. “One of the big stumbling blocks we’re going to have to make progress on is prosecutions. I haven’t seen signs of the leadership we need if we’re really going to take that forward.”
George said the length of time it takes for a country to address its anti-money-laundering and counterterrorism financing controls deficiencies and demonstrate progress can vary depending on the scope and severity of the problems, the resources available, and the political will to take action.
The FATF will monitor progress and conduct follow-up evaluations. As it stands, SA is scheduled for reassessment in the 2027/2028 round of mutual evaluations.
“The snail’s pace efforts to bring the perpetrators of state capture and corruption to book reflect how difficult it could be for SA to tick all eight boxes in the FATF action plan,” George said. “I believe Godongwana and police minister Bheki Cele are being optimistic when they predict SA will get off the list by mid-2024.”
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.