A November 2023 progress report on South Africa’s work towards addressing technical compliance deficiencies identified by the Financial Action Task Force (FATF) in the country’s anti-money laundering framework, reveals that there is forward momentum.
South Africa has been a FATF member since 2003 and like all members, is therefore required to undergo mutual evaluations on a scheduled basis of its compliance with the organisation’s 40 recommendations, which are internationally agreed standards according to which members work to enhance their anti-money laundering and combating the financing of terrorism (AML/CFT) laws, as well as those relating to the financing of the proliferation of weapons of mass destruction.
The mutual evaluation review (MER), carried out in 2021, found deficiencies in South Africa’s AML/CFT framework and made 67 recommendations to address these. The country was unable to resolve all deficiencies, though it did pare down the initial 67 concerns to just eight by the time the FATF held its deliberations on South Africa’s fate in February 2023.
The country was added to the FATF grey list of “jurisdictions under increased monitoring that are actively working with the FATF to address strategic deficiencies in their regimes” and has undergone two follow-up assessments since then.
“Countries strengthen their financial systems by addressing these [deficiencies], thereby enhancing the integrity of the country and global financial system,” said the National Treasury in a fact sheet issued soon after the grey-listing.
Overall, says the FATF, the expectation is that countries will have addressed most, if not all, technical compliance deficiencies by the end of the third year from the adoption of their MER.
Follow-up report
The November 2023 follow-up report (FUR) is the first in which South Africa sought re-ratings.
The country was assessed on its response to various technical compliance deficiencies identified in the MER in terms of the following recommendations – R.1, R.2, R.5, R.6, R.7, R.8, R.10, R.12, R.14, R.15, R.17, R.18, R.22, R.23, R.24, R.25, R.26, R.27, R.28, and R.32.
As of the 2023 FUR, South Africa is fully compliant in only five of the 40 recommendations – Terrorist financing offence (R.5); Tipping off and confidentiality (R.21); Designated Non-Financial Businesses and Professions: other measures (R.23); Responsibilities of law enforcement and investigative authorities (R.30); and Powers of law enforcement and investigative authorities (R.31).
The country is largely compliant in another 29 recommendations and partially compliant in five more. Recommendation 17 (Reliance on third parties) is rated non-applicable.
As a result of South Africa’s progress in strengthening its measures to fight money laundering and terrorist financing since the MER, the FATF re-rated the country thus:
- Recommendations 5 and 23 are upgraded from ‘partially compliant’ to ‘compliant’.
- Recommendations 1, 7, 10, 14, 18, 22, 24, 25, 26, 27, and 28 are upgraded from ‘partially compliant’ to ‘largely compliant’.
- Recommendation 12 is upgraded from ‘non-compliant’ to ‘largely compliant’.
- Recommendations 6, 8, and 15 are upgraded from ‘non-compliant’ to ‘partially compliant’.
- Recommendations 2 and 32 remain ‘partially compliant’ as not enough progress was seen.
- Recommendation 17 is re-rated from ‘non-compliant’ to ‘not applicable’.
South Africa remains in enhanced follow-up, says the FATF, and will report back to the organisation in October 2024 on further progress achieved.
Download the FUR for an in-depth analysis.
