Ramifications of SA’s greylisting by FATF

The greylisting of SA by the Financial Action Task Force (FATF) has significant implications for its economic growth and global competitiveness, warns the Webber Wentzel finance team.

SA “has taken certain measures to address FATF concerns”, such as establishing the Investigating Directorate last April to “prosecute individuals and entities that were involved in state capture”.

Webber Wentzel claims SA has “prosecuted several money laundering offenders, and utilised extraditions to get fugitive offenders”.

The recently enacted legislation comprises the General Laws (Anti-Money Laundering and Combating Terrorism Financing) Amendment Act and the Protection of Constitutional Democracy Against Terrorist and Related Activities Amendment Act.

The teams explain the latter “expands the definition of terrorist activities; provides for crimes related to terrorist training, the joining of terrorist organisations, and the possession and distribution of publications with terrorism-related content”.

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SA recently made a high-level political commitment to work with the FATF and the Eastern and Southern Africa Anti-Money Laundering Group to strengthen the effectiveness of its regime, and has developed national policies, procedures and controls to prevent cases of money laundering and terrorism financing.

The economic consequences of the greylisting according to the team are that there will be a decrease of capital flows into SA, which could result in a balance of payments crisis in a “vulnerable country”.

There could be less direct foreign direct investment, a decrease in SA’s external reserves, difficulty in obtaining finance in the international market and decreased competitiveness in the global economy.

Further, economic penalties may be imposed and climate adaptation will be impacted.

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The team is fairly optimistic, and anticipate SA can “come off the greylist within as little as two years if government and the private sector cooperate to take decisive actions to address the FATF’s concerns”.

However they caution, SA “has a plan of action, it is now about implementation”.

The Financial Sector Conduct Authority, the market conduct regulator of all financial institutions in SA, said that it is “working closely with other key stakeholders, including the South African Reserve Bank, Financial Intelligence Centre and the National Treasury, to strengthen its oversight of anti-money laundering and counter-terrorism financing risks in the financial sector”.