SA has a 15% chance of avoiding grey-listing – time to put 100% effort into the fight

Business Leadership SA’s Busisiwe Mavuso believes that South Africa still has a fighting chance of avoiding being grey-listed.

Last year, the Financial Action Task Force (FATF) published highlighting SA’s deficiencies and effectively gave the country until this October, to get its house in order.

Much of the media’s focus after BLSA issued its report on grey-listing last week has been on the 85% chance of SA being placed on the list by the FATF, the international watchdog organisation for money laundering and the financing of terrorism.

But the Mavuso says that more focus needs to be paid to the 15% chance of the country avoiding it altogether.

“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,” said Mavuso

SA needs to react fast

The report, researched by Intellidex, found that the economic impact of being grey-listed depends on how the country reacts to improving its systems and processes to combat money laundering and the financing of terrorism.

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“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 that we are seriously addressing the problems the impact could be less than 1%.

“This is because global counterparts will be more willing to maintain their relationships with South African clients and we’re likely to be removed from the grey list earlier,” Mavuso advised.

She reckons that the country has already made much progress, as the report outlines.

“A major area of SA’s weakness highlighted in the FATF report was in the lack of prosecutions following the state capture era and that’s because our capacity to combat commercial crimes was decimated by the perpetrators.

NPA comes to the table

“But 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 over R5.5bn.

“Intellidex notes also that there have been impressive joint programmes to improve investigation of corruption between the NPA and numerous other crime-fighting units including the Directorate for Priority Crime Investigation and the Financial Intelligence Centre, as well as with the SA Revenue Service,” she noted.

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But the report also lists three main areas where the country is struggling and this is where it needs to focus.

“Two of them shouldn’t be too problematic. We need an efficient system of gathering and dissemination 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,” she said.

“The third area is possibly more problematic. The Directorate for Priority Crime Investigation, or Hawks, have made minimal progress in building the capacity to investigate money laundering and terrorist financing, as well as other commercial crime,” she added.

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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,” Mavuso affirmed.