South Africans who transact with foreign banks and financial institutions should expect higher levels of scrutiny and delays in processing their transactions now that the country has been placed on the Financial Action Task Force’s grey list. This is the view of financial planner Iniel van Zyl, who heads Brenthurst Wealth’s branch in Fourways.
Once a country is on the grey list, any financial dealings by people living there are viewed with greater circumspection, and firms in FATF-compliant countries will take extra measures to protect themselves, Van Zyl says.
An unavoidable consequence of grey-listing is that future dealings with companies, particularly financial institutions, will become more onerous.
“How onerous? That will depend on each individual case. However, expect to complete additional forms and provide more detailed evidence of your financial dealings, especially in respect of the source of funds to be utilised for investment purposes. This additional paperwork will add to the delays, which will be compounded by investigations into every transaction that will be subject to greater scrutiny. What this means is that, where previously you would expect an outbound money transfer to take a week or two, this could now take substantially longer – some even suggest three to six months,” Van Zyl says.
He says most local institutions have already bolstered their due diligence processes in anticipation of the enhanced scrutiny that their clients will have to face, so the additional paperwork and checks are probably embedded in the processes when dealing with South African financial services firms.
The South African Revenue Service (Sars) is also requesting greater visibility of your source of funds. It is therefore vital to ensure you have all your paperwork in order, to satisfy Sars’s requests, Van Zyl says.
Apart from the delays and possible frustration with the longer processes, the increased due diligence could add to your costs. Certain international institutions may request hard copies of the documentary evidence you have to provide. This means that the documentation must be verified by a notary, which comes at an additional cost to investors, he says.
You should make provision for more time to complete transactions and provide evidence in the correct format, to satisfy all the parties involved, from the foreign banks to Sars.
No need to panic
South African investors should be aware that although their dealings with foreign institutions will probably change, their offshore investments and finances will, for the most part, remain intact and unchanged.
“So, your offshore investments will remain safe, and the bottom hasn’t fallen out of the local market or the currency. This is not to say being placed on the list won’t affect the country. It will almost certainly hurt the direct foreign investment case, but so has the downgrade to junk status more than five years ago. As ordinary South Africans, we’re aware of the junk status, but that hardly influences our every investment decision – and neither should the FATF grey-listing,” Van Zyl says.
