If South Africa does escape being grey-listed next year, it will be by the skin of our teeth. Time is not on the country’s side when one considers the work that must be done to process the legislation aimed at preventing grey-listing relative to the deadlines set by the Financial Action Task Force (FATF).
And, as National Treasury and the Financial Intelligence Centre (FIC) have pointed out, legislative amendments alone will not suffice in preventing grey-listing; enforcement is a key consideration for FATF.
The National Assembly’s Standing Committee on Finance (Scof) only started processing the General Laws (Anti-Money Laundering and Combating Terrorism Financing) Amendment Bill this week. The Amendment Bill was tabled in Parliament on 29 August.
On Tuesday, the committee extended the deadline for comments.
Once the Scof has processed the bill, it will be referred to the Presidency, which must do its own due diligence before the president signs it into law.
The committee must also finalise the Tax Administration Laws Amendment Bill and the Taxation Laws Amendment Bill before the Medium-term Budget Policy Statement on 26 October.
The other draft law aimed at preventing grey-listing is the Protection of Constitutional Democracy against Terrorist and Related Activities Amendment Bill, which Police Minister Bheki Cele brought before Parliament in July. Concerns have been raised about the constitutionality of some of the bill’s provisions.
FATF’s timeline
On Tuesday, Pieter Smit, the FIC’s the executive manager for legal and policy, told the Scof that legislative amendments are not all that is required to stave off grey-listing. But without addressing the legislative deficiencies, it will be impossible for South Africa to argue that it has done enough not to be grey-listed, despite anything else that might have been achieved by then, Smit said.
Smit said South Africa is expected to present a report to the FATF by next month on the steps it is taking to address the shortcomings identified in its Mutual Evaluation (ME) report of last year.
The report will be referred to a review panel drawn from FATF member countries. The panel will “form a view” on whether South Africa has done enough to address the shortcomings, or whether it is working towards addressing them.
In January next year, South Africa will meet a committee drawn from the review panel. The committee’s conclusions will be discussed, and South Africa will find out whether providing additional information, or clarifications or explanations may change the committee’s opinion.
Based on the meeting, the committee will draw up a report, which will be used by the FATF in February to decide whether South Africa has done enough to address the shortcomings identified by the ME. If the FATF decides it has, the country will not be grey-listed, although the FATF will continue to monitor South Africa.
If the FATF decides that South Africa has not addressed the material findings in the report, the country will be grey-listed. The FATF will set South Africa the task of addressing specific findings within a certain time frame.
The country will be grey-listed from a year to three years, depending on the nature of the action that needs to be taken and at what point it can convince the FATF that it has addressed those findings.
Smit said it was important to understand that the FATF does not consider work in progress “as having achieved an outcome. Legislation will only be considered to have achieved an outcome if the legislation is in force and being applied in practice.”
He said the FATF will not entertain requests for extensions to comply.
‘Parliament not to blame’
The Scof’s chairperson, Joseph Maswanganyi (ANC), said it should be made clear that Parliament was not unnecessarily prolonging the process of passing the bill.
“This bill was tabled in Parliament just recently, whereas Treasury was seized with this matter [grey-listing] from 2017,” he said. “It’s not Parliament that is unnecessarily delaying the process of passing the bill. The executive should take the responsibility for tabling the bill very late when they [knew] they were supposed to go back and report to FATF,” he said.
Parliament derived its mandate from the people, and it would be a “mockery” of democracy and public participation if the committee did not listen to stakeholders’ concerns.
“So, we will have to strike a balance to try to make sure we assist Treasury to comply with the regulations. However, stakeholders are raising very serious issues that have to be considered,” Maswanganyi said.
