South Africa’s financial sector regulators and law enforcement agencies have their work cut out for them to tick off all the action items required to exit greylisting.
This was the message from National Treasury today when it commented on a progress report adopted by the Financial Action Task Force (FATF) at its Plenary this month.
When the FATF grey-listed South Africa in February 2023, a jointly agreed Action Plan was adopted listing 22 action items linked to the strategic deficiencies identified in the country’s anti-money laundering and counter-terrorism financing (AML/CFT) regime.
South Africa must address all 22 items to get off the grey list. The deadlines for addressing the action items are between January 2024 and January 2025.
If South Africa is assessed as having largely addressed the action items in February 2025, the FATF will schedule an onsite visit in April or May 2025, to confirm that assessment and make a recommendation to the FATF Plenary in June 2025.
National Treasury said this month’s Plenary adopted a report by the Joint Group, confirming that 5 of the 22 action items are now addressed or largely addressed. These relate to the legal provisions criminalising terrorist financing and underpinning South Africa’s targeted financial sanction regimes related to terrorism financing and proliferation financing, increasing the use of financial intelligence from the Financial Intelligence Centre to support money laundering investigations, and increasing the resources of AML/CFT supervisors.
In this cycle of reporting, the FATF also considered that two further action items have now been partly addressed, confirming that 14 of the 17 outstanding action items have now been partly addressed.
Three action items have not been addressed at all, Treasury said.
Staggered deadlines
The deadline for South Africa to address (or at least largely address) four of the outstanding 17 action items is May 2024. The FATF will consider South Africa’s progress on these action items at its Plenary in June 2024.
A further eight action items are due in September 2024, and the final five items are due in January 2025.
National Treasury noted that although South Africa is on track to address all the outstanding action items, “it remains a tough challenge to address all 17 of the remaining action items by February 2025”. All relevant agencies and authorities will need to continue to demonstrate significant improvements and sustain such improvements.
Technical compliance
Treasury pointed out that addressing the effectiveness deficiencies (per the Action Plan) is distinct from addressing the technical compliance deficiencies, which are related to the adequacy of the country’s AML/CFT laws and policy frameworks.
In October 2023, the FATF Plenary formally re-rated 18 of South Africa’s 20 technical deficiencies, based on the progress made by the authorities in the two years following the FATF’s 2021 mutual evaluation report.
Read: FATF releases report on SA’s progress with addressing compliance deficiencies
Of the 20 deficiencies, 15 were upgraded to a point where they are no longer deficient, as 14 Recommendations are now fully or largely compliant, and one Recommendation was deemed to be inapplicable to South Africa.
Following the re-ratings, South Africa is now deemed to be fully or largely compliant in 35 of the 40 FATF Recommendations, including in five of the six core FATF Recommendations.
South Africa will apply for further re-ratings of technical compliance deficiencies, for consideration by the FATF Plenary in October.
