FATF stands for the Financial Action Task Force and is an intergovernmental organisation. It develops and promotes policies to combat money laundering, terrorist financing, and other threats to the integrity of the international financial system.
On 24 February 2023, South Africa was put on a grey list by the FATF for falling short of specific international standards for combating money laundering and other serious financial crimes. South Africa is one of many countries on the continent on the grey list. Others include Mozambique, Tanzania, Uganda, DRC, Mali, Senegal, South Sudan and Burkina Faso.
A FATF listing can have significant implications for businesses. It affects the overall regulatory and legal framework in a particular jurisdiction related to anti-money laundering and counter-terrorist financing.
A country or jurisdiction on the FATF’s high-risk list can increase regulatory scrutiny for businesses operating within that jurisdiction. Companies may face additional compliance requirements and due diligence obligations to prevent financial crimes such as money laundering and terrorist financing.
Being on the FATF list can also harm a country’s reputation, which can affect the perception of its business environment and the willingness of foreign investors and financial institutions to do business there. This, in turn, can make it more difficult for companies to access financing and conduct transactions.
According to Daily Maverick, during the period of the review, South Africa will need to do the following:[1]
- “Demonstrate a sustained increase in investigations into outbound Mutual Legal Assistance requests that help facilitate money laundering/terrorism financing (ML/TF) and confiscations of different types of assets in line with its risk profile;
- Improve risk-based supervision of Designated Non-Financial Businesses and Professions (DNFBPs) and demonstrate that all anti-money laundering and counter-terrorism financing (AML/CFT) supervisors apply effective, proportionate and effective sanctions for noncompliance;
- Ensure that competent authorities have timely access to accurate and up-to-date Beneficial Ownership (BO) information on legal persons and arrangements and apply sanctions for breaches of violations by legal persons to BO obligations;
- Demonstrate a sustained increase in law enforcement agencies’ requests for financial intelligence from the Financial Intelligence Centre for its ML/TFML/TF investigations;
- Demonstrate a sustained increase in investigations and prosecutions of serious and complex money laundering and the full range of terrorist financing activities in line with its risk profile;
- Enhance its identification, seizure and confiscation of proceeds and instrumentalities of a wider range of predicate crimes, in line with its risk profile;
- Update its terrorist financing risk assessment to inform the implementation of a comprehensive national counter-financing of terrorism strategy; and
- Ensure the effective implementation of targeted financial sanctions and demonstrate an effective mechanism to identify individuals and entities that meet the criteria for domestic designation.”
According to Daily Maverick, it takes from one to three years for countries to address the deficiencies and to be taken off the grey list, something that occurs after a final, on-site assessment when both FATF and the relevant country believe that all elements of the action plan have been primarily or entirely addressed.
On the other hand, being removed from the FATF list is a positive development for businesses in a particular jurisdiction. The country has significantly improved its anti-money laundering and counter-terrorist financing framework. This can lead to a more favourable business environment and increased confidence among investors and financial institutions.[1]
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