Acting National Treasury director-general Ismail Momoniat is confident South Africa’s greylisting by the Financial Action Task Force (FATF) won’t affect the financial sector.
Speaking on Friday from Paris where he led a government delegation to meet the FATF, Momoniat said that while the decision was disappointing, the intergovernmental organisation recognised that South Africa had made good progress in reducing to just eight the number actions still required to be given the all clear, and the financial sector was not part of them.
“The financial sector does not feature in the eight strategic deficiencies. We don’t expect an impact on [the sector].” Momoniat said.
He is confident SA will be removed from the list in a year, or two at most.
“When we started there were 67 actions we had to deal with; it was going to be almost a miracle to have 67 out of 67 passed. We’ve reduced it to eight areas; that’s a huge achievement.”
The FATF announced its decision on Friday afternoon, saying while the country had made significant progress on many of the mutual evaluation report’s recommended actions, it would have to ensure effective implementation of targeted financial sanctions and demonstrate an effective mechanism to identify those that “meet the criteria for domestic designation”.
“Jurisdictions under increased monitoring are actively working with the FATF to address strategic deficiencies in their regimes to counter money laundering, terrorist financing, and proliferation financing,” it added.
“When the FATF places a jurisdiction under increased monitoring, it means the country has committed to resolving swiftly the identified strategic deficiencies within agreed time frames and is subject to increased monitoring.”
South Africa’s Financial Sector Conduct Authority said that, based on the extensive work undertaken over the past 18 months, it was confident it had put in place a robust framework to detect, monitor and swiftly act against facilitators of financial crime.
“The things that pertain to our mandate have largely been attended to. So as an authority in charge of supervising the conduct of financial players in SA, we are satisfied that our systems and processes are rigorous enough to monitor local players as required by FATF,” the market regulator said in a statement.
Since the FATF warned South Africa it was at risk of greylisting in 2021, the government has enacted the General Laws (Anti-Money Laundering and Combating Terrorism Financing) Amendment Act and the Protection of Constitutional Democracy Against Terrorist and Related Activities Amendment Act.
The Treasury said the FATF’s recognition of South Africa’s progress in applying a risk-based approach to the supervision of banks and insurers was encouraging.
“National Treasury, therefore, expects that the increased monitoring will have limited impact on financial stability and costs of doing business with South Africa. This will, however, be monitored closely,” it said in a statement.
The Treasury said the FATF’s recognition of South Africa’s progress in applying a risk-based approach to the supervision of banks and insurers was encouraging
The Reserve Bank said it would strengthen its supervision as part of its zero-tolerance approach towards abuse of the financial system by money launderers and financiers of terrorism.
“Supervision is critical to ensuring that a cohesive and resilient anti-money laundering, counter-terrorist financing and counter-proliferation financing framework exists in South Africa,” it said.
“All supervisors within the SARB will continue their efforts to build upon and maintain an effective supervisory and enforcement system comprising a wide range of supervisory measures.”
The Banking Association SA (Basa) said that while greylisting could result in doing business with South Africa being more onerous and costly and detract from its reputation as an investment destination, it noted that FATF did not call for the application of enhanced due diligence measures to greylisted jurisdictions.
“Basa will do whatever it can, with other public and private institutions, to successfully implement the remedial actions that have been agreed to,” it said in a statement. “The priority now is to ensure that South Africa is removed from the greylist as soon as possible.”
Still, some organisations and businesses said being added to the greylist would add further compliance burdens to South Africa's banking system, which already is the most sophisticated and well-regulated on the continent.
Business Unity South Africa (Busa) CEO Cas Coovadia said greylisting was a further blow to confidence.
“We are in the same book as South Sudan and Nigeria, for instance, and we should not be, because we are a first-world, sophisticated banking financial sector that can manage and has the controls in place to manage money laundering, but the government is not moving quickly enough on the recommendations,” he said. “So again, it sends a bad message from a confidence and investment point of view.”
PwC’s response and risk leader Kerin Wood said South African companies will need to respond quickly to mitigate the risks stemming from greylisting, which could increase the cost of raising finance and trading with global counterparties.
“South African companies operating as financial intermediaries across jurisdictions may be asked to understand independent risk assessments to enable their counterparties to gain assurance that their controls or frameworks are aligned with global standards and to prevent such counterparties from exiting these relationships,” Woods said.
George Herman, the chief investment officer of wealth management firm Citadel, said pressure on bonds and the rand had been persistent in the run-up to the greylisting announcement on Friday.
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.