Lack of prosecutions hurts SA’s chances of being removed from greylist

The lack of successful prosecution of large criminal networks remains a stumbling block as government tries to beat the deadline to get off the Financial Action Task Force (FATF) greylist.

This is according to organised crime investigator at IRS Forensic Investigations, Chad Thomas.

South Africa was greylisted a year ago by the FATF.

The global financial watchdog said the country failed to comply with international standards to prevent money laundering, terrorist financing and proliferation financing.

Greylisting: SA ‘lagging in law enforcement’

In its quest to comply and get off the greylist by January 2025, government periodically meets with the FATF to address 22 listed concerns that require action.

The parties are scheduled to meet again at the end of the month.

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While SA Reserve Bank governor Lesetja Kganyago on Wednesday assured financial experts that South Africa will exit the greylist on the 2025 review date, a lot of work in law enforcement and prosecution still needs to be done.

The country is still a playground for sophisticated syndicates, said Thomas.

“We are behind in enrolling and prosecuting cases involving major financial crime and money laundering syndicates.

“The FATF needs to see a concerted effort from the state, in particular from the Hawks, NPA, FIC, ID and AFU to ensure effective intelligence-driven and prosecutorial guided investigations targeting these syndicates and recovering assets hidden locally and abroad,” he said.

Law firms, estate agents are ‘high risk’

Last month, the Financial Intelligence Centre (FIC) decried the lack of cooperation from sectors such as legal practitioners, trust account managers and property companies.

Some of these companies were yet to comply and file outstanding risk and compliance returns (RCRs). The deadline for doing so was March last year.

“At this stage, all entities in the legal practitioner sector who have failed to submit their outstanding RCRs by 31 May 2023 are non-compliant and deemed as delinquent high-risk legal practitioner entities and may expect to receive administrative sanction notices for their failure to submit the RCR,” the FIC said at the time.

In a reply to emailed questions on Thursday, the financial watchdog said the submission rate by estate agents and law firms is currently at 55 and 60 percent respectively.

Additionally, sanction notices have been sent to 264 “delinquent” institutions for non-compliance.

“Further notices will be issued in due course to include dealers in precious metals and stones, covered by Directive 7.

“The FIC will ensure we cover all sectors in its sanctioning process, and entities can expect to receive a sanction for RCR non-submission,” the watchdog said.

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But Thomas argued that the required reporting process by the businesses is a minor concern, adding that organised crime syndicates needed to be urgently tackled.

“People are fixated with the state capture narrative and are losing sight of the fact that sophisticated international financial and organised crime syndicates are using South Africa as their springboard from which to launch massive scams targeting victims from around the world.

“We cannot get off the greylist if we do not have sufficient qualified investigators and prosecutors. This is only possible if the state makes the financial resources available to the Hawks and NPA to fully enhance them.

“The state must present that in the next plenary session and therein lies a problem,” he said.

Good laws, but no capacity to act

Albert van Zyl, a senior lecturer at the North West University’s Unit for Corruption and Integrity Studies, also raised a lack of implementation by government.

“South Africa has an established finance and banking system, we also have a big economy and because of that, criminals infiltrate and use our systems.

“Even London is called the biggest money launderer in the world, you have rich people hiding their ill-gotten gains.

“We have a good system, but criminal syndicates are hijacking it for their gains,” Van Zyl said.

In August 2022, President Cyril Ramaphosa signed the Anti-Money Laundering and Combating Terrorism Financing Amendment Bill to tackle money laundering and terror financing.

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