South Africa’s greylisting report card

South Africa has made good progress in meeting the Financial Action Task Force (FATF) recommendations to get the country off its greylist, with the country at least partially complying with all recommendations. 

This is feedback from Francis Marais, the head of product at Morningstar South Africa, who detailed the progress the country has made regarding its financial oversight.

On 24 February 2023, South Africa was placed on FATF’s list of “jurisdictions under increased monitoring”, known as the greylist. 

This was based on the October 2021 County report identifying certain areas of non-compliance (NC) and partial compliance (PC). 

FATF has a list of 40 recommendations, where members are expected to achieve satisfactory levels of compliance. 

As per the October 2021 report, South Africa had five areas (out of 40) of non-compliance, 15 areas of partial compliance, 17 areas of being largely compliant and three areas of being fully compliant. 

South Africa was then given time to address these concerns. However, it couldn’t do so adequately in the time given and was subsequently added to the Greylist on 24 February 2023. 

In October 2023, FATF conducted an exercise to determine the country’s progress since being added to the greylist. 

It found that South Africa has made significant progress in addressing most of the concerns.

Most notably, no areas of non-compliance were identified, and the areas of partial compliance decreased from 15 in our previous report to only five in the latest progress report. 

The graph below provides a visual representation of the overall progress made. As can be seen, South Africa’s entire “distribution” has shifted to the right, which is where it should be.

The assessment is very positive. However, on two recommendations – R.2 and R.32 – South Africa has made insufficient progress. 

These recommendations relate to coordinating anti-money laundering legislation throughout the government and provisions relating to combating the financing of terrorism. 

In particular, the government needs to ensure that policy, financial intelligence, law enforcement, supervisory actions and other relevant authorities can cooperate and coordinate their efforts and exchange information.

The updated report’s feedback shows that South Africa still lacks coordination and implementation of adequate legislation among the relevant and responsible parties. 

Furthermore, the country lacks adequate controls regarding how it manages, monitors and restricts cash coming into and out of South Africa. 

South Africa has to implement additional measures to manage how cash enters and exits the country’s borders. 

Simply put, it has to address the notion that South Africa has become a convenient hub for criminals and their various networks and syndicates to funnel their proceeds through.

“While we have made some significant progress across the board, the country needs to address these two recommendations urgently,” Marais said. 

This is unlikely to happen before the end of the year, with the government firmly focused on the country’s general election in May.