The Financial Action Task Force (FATF) announced on Friday that South Africa has made significant headway in addressing deficiencies identified in its anti-money laundering and counter-terrorism financing (AML/CFT) systems.
After recent upgrades, South Africa now largely or fully addresses 16 out of 22 FATF action items, leaving six critical items to be resolved before the final evaluation in February 2025.
The FATF, a global watchdog on financial crimes, noted this progress at its October plenary meeting in Paris.
According to the FATF's latest report, South Africa’s improvements include boosting outbound Mutual Legal Assistance (MLA) requests, enhancing AML/CFT supervisory capacity, strengthening the risk-based supervision of non-financial businesses, and increasing enforcement actions related to predicate crimes.
Treasury said: "South Africa has taken substantial steps towards strengthening its AML/CFT framework, improving risk-based supervision, and enforcing targeted financial sanctions."
Being on the FATF greylist means South Africa is under increased monitoring to address weaknesses in its AML/CFT and proliferation financing frameworks. While different from the FATF's more severe "blacklist," which applies to uncooperative countries, greylisting signals that the country is actively working with the FATF to resolve deficiencies.
Greylisting can impact South Africa's international standing, often resulting in its inclusion on the EU high-risk third countries list and other jurisdictions’ high-risk registers. This added scrutiny may affect foreign investment and international financial access, placing indirect pressure on the national economy.
Despite the positive assessment, Treasury warns that meeting all six remaining action items by February will be challenging. Three key items involve improving investigation and prosecution efforts against complex money laundering and terror financing, while the other three require ensuring timely access to accurate beneficial ownership information for legal entities.
“South Africa should continue to address its remaining strategic deficiencies,” FATF said, urging robust enforcement of sanctions for non-compliance and immediate access to beneficial ownership information.
For South Africa to exit the FATF greylist, it must resolve all action items before February 2025. If successful, the FATF Africa Joint Group will conduct an onsite review in May 2025, with the potential for a formal greylist exit recommendation by June. Should any items remain outstanding, the next opportunity for review would extend to October 2025 or later, meaning a prolonged greylisting period.
An interdepartmental committee, chaired by Treasury, is overseeing the push to finalise these reforms. Key tasks include reinforcing mutual legal assistance, confiscating crime proceeds, implementing counter-terror finance measures, and enhancing supervisory actions across AML/CFT systems.
"The committee has provided strong leadership in coordinating these improvements," National Treasury stated, highlighting that recent upgrades were vital for demonstrating sustained progress.
One hurdle is related to beneficial ownership registries. Treasury urged companies and trusts to update beneficial ownership information with the Companies and Intellectual Property Commission (CIPC) and the Masters Office by November 30, 2024.
FATF said South Africa must “ensure timely access to accurate beneficial ownership information” for effective compliance.
In a separate development, FATF approved three additional upgrades to South Africa’s compliance with its 40 Recommendations, increasing the count of largely compliant or compliant ratings to 37. Only Recommendations 8 (Non-Profit Organisations) and 32 (Cash Couriers) remain partially compliant, though they do not impact greylisting.
Further legislation is planned to bolster compliance with these outstanding recommendations before the next FATF mutual evaluation in 2026, Treasury said.
South Africa’s progress will be documented in its 3rd Enhanced Follow-Up Report, to be published soon on the Treasury’s website.
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