South Africa could be gray-listed says Finance Minister Enoch Godongwana
With South Africa expected to be added to the global anti-money laundering body's grey list on Friday, Treasury believes the country needs more prosecutions and asset freezes to demonstrate compliance.
Grey-listing was mentioned by Finance Minister Enoch Godongwana in his budget statement on Wednesday.
"We recognize the need to be more effective in implementing our regulations, particularly in fighting organized and sophisticated crime."
The government has prepared for the possibility of being grey-listed, according to acting director-general Ismail Momoniat, who has been in consultations with the Financial Action Task Force (FATF), a global organization that monitors compliance with anti-money laundering and counter-terrorism financing measures, in recent weeks.
If South Africa is added to the grey list, other countries will be required to conduct "increased monitoring" when doing business with local companies and individuals. International banks and investment firms will conduct greater due diligence on South Africans. Local banks will also be obliged to do greater compliance, raising their costs and, eventually, fees.
Momoniat feels that the "phenomenal" progress made in the last year and a half should be recognized, and that the sanction's impact should be reduced.
This year, the government passed new legislation to prevent money laundering and terrorism funding, addressing 15 of the 20 legal flaws noted by the FATF.
"The remaining five will be addressed by regulations and practices that do not require legislation," Treasury stated in Budget documents released on Wednesday. The Budget also includes an additional R265.3 million for the Financial Intelligence Centre over the next three years to implement the State Capture Commission and FATF recommendations.
Nonetheless, Treasury agreed that more effort is required, with Momoniat stating that South Africa has to intensify investigations, prosecutions, and asset freezes.
"Hopefully, we'll see many more cases in the next year or so," Momoniat said, adding that government agencies must reverse the impacts of state capture.
Poor anti-money laundering controls among South African lawyers, estate agents, and crypto platforms are also critical areas for development. Nevertheless, new legal requirements to certify beneficial ownership of assets have not been adequately applied by corporations, trusts, and non-profit organizations.
In June, the Treasury has requested that the FATF "formally reassess" South Africa's compliance.
