South Africa’s government is forging ahead with efforts to fend off greylisting, which the treasury has warned would have a detrimental effect on the integrity of the banking sector and the economy.
The country’s lawmakers have to pass two separate pieces of legislation — the Protection of Constitutional Democracy against Terrorist and Related Activities Amendment Bill and the General Laws Amendment Bill — before February 2023, when South Africa will appear before the Financial Action Task Force (FATF).
Last October, the FATF published an evaluation of South Africa’s measures against money laundering. The evaluation found holes in the country’s policies and efforts to combat financial crimes, despite its financial system being highly vulnerable to these crimes.
South Africa failed in 20 of the 40 FATF standards and in all 11 of the measures to combat money laundering and terrorist financing.
If the country fails to demonstrate that it is committed to addressing these weaknesses, it will land on the grey list, which will see it put under increased monitoring by the FATF. As a result, regulators in some of South Africa’s main trading partners may restrict their banks from transacting with the country’s banks.
On Monday, the treasury announced that the minister of finance had tabled the General Laws Amendment Bill, which was the subject of a meeting of parliament’s standing committee on finance on Wednesday.
At that meeting, acting treasury director general Ismail Momoniat explained that the bill will address 14 of the 20 technical compliance deficiencies identified by the FATF. The government was due to submit a report to the FATF on the country’s technical compliance at the end of August.
To ensure that the necessary laws are enacted as soon as possible, the omnibus bill contains amendments across several acts, including the Trust Property Control Act, the Nonprofit Organisations Act, the Financial Intelligence Centre Act, the Companies Act and the Financial Sector Regulations Act.
If the bill is enacted on time, Momoniat said, “it will be a massive step forward”.
Because South Africa is facing greylisting, Momoniat explained, “we have to do a significant amount within a year and a half”.
The “big elephant”, he said, is what happens between now and February next year, when South Africa will appear before the FATF plenary, which will decide whether the country has made enough progress towards plugging its deficiencies.
Tabling the two bills in parliament marks an important step towards showing the FATF that South Africa is working to solve some of the deficiencies. “If we reported on no progress at the end of August,” Momoniat said, “then perhaps they may have intervened.”
“But I think we should be okay, given that we have tabled the bills. It does demonstrate commitment by government. And our hope is that by the end of October, we can show that — through the parliamentary process — there has been significant progress.”
The amendments, Momoniat pointed out, are not enough to fend off greylisting. The big challenge, he said, will be to demonstrate that law enforcement agencies are able to identify, investigate and prosecute financial crimes.
“We will have to show as a country that they are investigating the crimes and that it doesn’t matter who is responsible, whether you are a minister, you are a president, you’re a public servant, whether you are Steinhoff, whether you are Tongaat,” he said earlier in the meeting.
“In all of those cases, there needs to be a sense that they are getting properly investigated without fear or favour. Secondly, to the extent that in some of them there are prosecutions, that people are prosecuted, that the cases generally are successfully done so.”
Momoniat said he believed that avoiding the grey list was doable. “We just have to demonstrate the commitment and be able to tell our story well. But also, we need facts on the ground. We have got to demonstrate that there is real action.”
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