Getting SA off greylist by 2024 not impossible

It remains questionable if South Africa can get off the greylist by 2024 according to government’s self-imposed deadline as it generally takes one to three years for countries to address the necessary deficiencies.

Before a country can be removed from the greylist, the Financial Action Task Force (FATF) must do a final, on-site assessment when both the FATF and the relevant country believe that all elements of the action plan have been largely or fully addressed,” says Candice Dookran, product manager and compliance expert at RelyComply, an AI-driven end-to-end anti-money laundering platform.

President Cyril Ramaphosa wrote in a recent newsletter that South Africa knows what government must do to be removed from the greylist and that the fundamentals are in place.

The FATF identified eight areas of strategic deficiency that government must urgently attend to, to get off the greylist.

Dookran says although the FATF has indicated that South Africa made significant progress in recent months, but these efforts fell short of what was needed to avoid greylisting.

“However, I believe that given all that needs to be done to satisfy the FATF regarding the country’s financial crime prevention strategies, including the eight areas highlighted by the taskforce, this will most likely be achieved by the end of 2026.” 

ALSO READ: Here’s how ANC government dropped the ball with greylisting

No time to waste to get off greylist

She says there is no time to waste.

“Considering the impact that being greylisted has on the country, it is vital for government to swiftly accomplish its action plan. Historically, greylisting has led to a substantial decline in capital inflows and foreign direct investment, resulting in a subsequently stagnating economy.

“This will likely be the case in South Africa, an economy which is already stagnating and where further job losses cannot be afforded.”

She also points out that government and state-owned companies will find it harder to borrow money and obtain additional financing from global banks and bodies such as the International Monetary Fund (IMF), the World Bank and the European Bank for Construction and Development.

“Greylisting could also lead to currency degradation, inflation and trade deficits and there is the possibility that South Africa could face sanctions. While the FATF itself does not impose sanctions, other countries, or bodies and organisations, such as the European Union (EU), might impose economic sanctions on a particular country in response to an unfavourable FATF review report.”

ALSO READ: South Africa’s greylisting: What it means

Steps to minimise impact of greylisting

Dookran says although the president mentioned that the country has been putting measures in place since 2021 to tackle 59 of the 67 recommended actions emanating from the FATF’s mutual evaluation, these aspects must be accomplished fast to minimise the impact on the country’s financial future, South Africa must:

• Demonstrate a sustained increase in outbound mutual legal assistance requests that help facilitate anti-money laundering and/or counter-terrorist financing investigations and confiscation of various types of assets in line with the country’s risk profile.
• Improve risk-based supervision of designated non-financial businesses and professions and show that all supervisors apply effective and proportionate sanctions for noncompliance.
• Ensure that competent authorities have timely access to accurate and up-to-date beneficial ownership information on legal persons and arrangements and that sanctions for breaches or violations by legal persons to obligations are suitably applied.
• Illustrate a sustained increase in law enforcement agencies’ requests for financial intelligence from the Financial Intelligence Centre for investigations.
• Exhibit a sustained increase in investigations and prosecutions of serious and complex money laundering and the full range of terrorist funding activities in line with the country’s risk profile.
• Enhance the identification, seizure and confiscation of proceeds and instrumentalities of a wider range of crimes that form part of larger crimes in accordance with the country’s risk profile.
• Update the country’s Terrorist Financing Risk Assessment to inform the implementation of a comprehensive national counter-terror financing strategy.
• Ensure the effective implementation of targeted financial sanctions and demonstrate a practical mechanism for identifying individuals and entities that meet the criteria for domestic designation.

ALSO READ: ‘Concerning, but less dire than some people suggest’: Ramaphosa downplays SA’s greylisting

“The need for implementing powerful compliance measures across the board is now more serious than ever before.

“Financial institutions have a part to play in rebuilding the country’s financial risk profile and technology will be key in bringing certainty to anti-money laundering practices, where accountability, efficiency and rigour are of the utmost necessity,” Dookran says.