Assurance, advisory and tax services multinational PwC South Africa says South Africa has made a lot of progress to address technical compliance with the Financial Action Task Force (FATF) requirements.
However, regardless of the FATF meeting outcome, South Africa cannot afford to be complacent and must continue with efforts to demonstrate the effectiveness of its enhanced legal framework through enforcement, it adds.
South Africa has been able to fast-track legislative reforms that seek to increase the breadth and depth of its regulatory frameworks. These efforts have included the enactment of the Anti-Money Laundering and Counter Terrorist Financing Amendment Act in December.
The amendment gives effect to various pieces of legislation to address technical deficiencies highlighted in the FATF’s evaluations, which include enhanced procedures and powers for regulatory authorities and improved access to information in relation to ultimate beneficial owners.
Further, the scope of application of regulatory requirements around anti-money laundering was also significantly widened at the end of 2022 through amendments to the Financial Intelligence Centre Act.
This served to make various new entities subject to the extensive obligations set out in the Act relative to the management of anti-money laundering and counter-terrorist financing. This included bringing higher-risk entities like virtual asset service providers and money transfer providers into the scope of accountable institutions under the Act, PwC South Africa notes.
Additionally, regulatory bodies, such as the Prudential Authority and the Financial Service Conduct Authority, have also worked alongside banks and non-bank financial institutions to enhance the application of the FATF’s risk-based methodologies to close out identified areas of concern.
These amendments are also supplemented by the Protection of Constitutional Democracy against Terrorist and Related Activities Amendment Bill of 2022, which addresses shortcomings linked to terrorist financing.
“South African authorities should be commended for their efforts around regulatory reform to stave off a potential greylisting. The speed at which they have facilitated this is noteworthy. The hope is that the efforts to date and the speed of implementation have been sufficient to demonstrate to the FATF the seriousness with which the country takes our obligations around the prevention of money laundering and terrorist financing,” says PwC South Africa risk and response leader Kerin Wood.
“Regardless of the outcome next week, South Africa cannot afford to be complacent and must continue in its efforts to demonstrate the effectiveness of its enhanced legal framework through enforcement,” she says.
Going forward, focus areas must include heightened levels of risk-based supervision by regulators, law enforcement agencies prioritising enforcement initiatives and ensuring such investigations are effectively supported through sufficiently capacitated and skilled staff, and mutual legal assistance and cooperation from other countries in criminal matters, she highlights.
South Africa awaits the outcome of the FATF meeting that is intended to determine if the country has done enough to address deficiencies in its current legal framework, as well as the effectiveness of its implementation. If successful, South Africa will be able to avoid greylisting by the global inter-governmental body.
Representatives from the National Treasury, investigative and prosecuting units and other government departments engaged with the FATF in mid-January on the progress made since October 2021 when South Africa was informed of the risk of possibly being greylisted.
The FATF is expected to decide at a summit during the week of February 20 to 24 if the campaign by South African authorities has been enough to shore up the country’s ability to prevent money laundering, terrorist financing and proliferation of financing for weapons of mass destruction, PwC South Africa notes.