BUSISIWE MAVUSO: We still have a fighting chance of avoiding greylisting

Much of the media focus after Business Leadership SA (BLSA) issued its report on greylisting last week has been on the 85% chance of SA being placed on the list by the Financial Action Task Force (FATF), the international watchdog for money laundering and the financing of terrorism.

Rightly so, but more focus needs to be on the 15% chance of us avoiding it. That’s a fighting chance, and with our economy teetering and fears of a global recession rising, we need to do everything we can to prevent it from weakening further.

The report, researched by Intellidex, concludes that the economic impact of being greylisted depends on how we react to improving our systems and processes to combat money laundering and the financing of terrorism. The FATF published a report a year ago highlighting SA’s deficiencies and in effect gave us until now to get our house in order.

If we are perceived to be slow and unwilling to comply, Intellidex estimates it could reduce GDP by 3% in the worst-case scenario. Should we show we are seriously addressing the problems that have been identified, the effect could be less than 1%. This is because SA's global counterparts will be more willing to maintain their relationships with SA clients, and we’re likely to be removed from the greylist earlier.

We have made considerable progress, as the report outlines. A big area of SA’s weakness highlighted in the FATF report related to the lack of prosecutions after the state capture era. That’s because our capacity to combat commercial crimes was decimated by the perpetrators. However, the National Prosecuting Authority (NPA) has been rebuilding resources and capacity, and while it is still short of both it has made good progress recently, filing 29 prosecutions related to state capture and securing freezing orders on more than R5.5bn.

Intellidex also notes that there have been “impressive joint programmes to improve investigation of corruption” between the NPA and various other crime-fighting units, including the Directorate for Priority Crime Investigation and the Financial Intelligence Centre, as well as with the SA Revenue Service. But the report also lists three main areas where SA is struggling, and this is where we need to focus.

Two of them shouldn’t be too problematic. We need an efficient system of gathering and disseminating data regarding beneficial owners of trusts and companies, and the Financial Intelligence Centre (FIC) needs to take on additional supervision responsibilities for the money laundering and terrorist financing oversight of non-financial institutions, including real estate agents, attorney firms, Krugerrand dealers and others. While the legislation to give effect to this is in progress, the additional budgets and resourcing still need to be developed.

The third area is possibly more problematic. The Directorate for Priority Crime Investigation, better known as the Hawks, has made minimal progress in building the capacity to investigate money laundering and terrorist financing, as well as other commercial crime. It has been slow to take on more staff, especially financial investigators and forensic accountants, the report states. With the private sector providing no-strings-attached resources where required to support legal and law enforcement processes, BLSA believes these institutions can be brought up to the required standards.

The report also recommends that the presidency set up an internal task team to lead the government response to greylisting, working with the interdepartmental committee assembled by the National Treasury. The task team must be resourced with expertise to facilitate the change management and capacitation that must happen in main institutions such as the Hawks and FIC. “It must be able to focus on blockages and capacity constraints in partnership with the police ministry, justice ministry, home affairs, National Treasury, SA Revenue Service and others.”

Should the government set up such a unit immediately it will be one more important step that may yet sway the FATF plenary when it sits in February to defer placing us on the greylist.

Whatever the permutations, the message to government and all stakeholders remains the same: SA needs to fight hard and move ahead with maximum speed in implementing the FATF’s recommendations. That way we’ll either be able to avoid greylisting entirely, or minimise the period spent on the list.

That’s a victory for our economy worth fighting for.

• Mavuso (@BusiMavuso2) is CEO of Business Leadership SA.