On the greylist – what does this mean?

Although the General Laws (Anti-Money Laundering & Combating Terrorism Financing) Amendment Act and Protection of Constitutional Democracy Against Terrorist & Related Activities Amendment Acts, were passed in December 2022, this was not enough for FATF and South Africa is under increased monitoring and is now actively working with the FATF to address the strategic deficiencies in its regimes to counter money laundering, terrorist financing, and proliferation financing.

As indicated in the announcement from FATF on 24 February 2023 (see: https://www.fatf-gafi.org/en/publications/High-risk-and-other-monitored-jurisdictions/Increased-monitoring-february-2023.html) and a fact sheet published by the Treasury Department (see: 2023022501 FATF Grey Listing Fact Sheet.pdf (treasury.gov.za)), South Africa's eight point action plan includes:

• Demonstrating a sustained increase in outbound mutual legal assistance (MLA) requests that help facilitate money laundering/ terrorist financing (ML/TF) investigations and confiscations of different types of assets in line with its risk profile.
• Improving risk-based supervision of designated non-financial businesses and professions (DNFBPs) and demonstrating that all anti-money laundering/ countering the financing of terrorism (AML/CFT) supervisors apply effective, proportionate, and effective sanctions for noncompliance.
• Ensuring that competent authorities have timely access to accurate and up-to-date beneficial ownership (BO) information on legal persons and arrangements and applying sanctions for breaches of violation by legal persons to BO obligations.
• Demonstrating a sustained increase in law enforcement agencies’ requests for financial intelligence from the Financial Intelligence Centre (FIC) for its ML/TF investigations.
• Demonstrating a sustained increase in investigations and prosecutions of serious and complex money laundering and the full range of TF activities in line with its risk profile.
• Enhancing its identification, seizure and confiscation of proceeds and instrumentalities of a wider range of predicate crimes, in line with its risk profile.
• Updating its TF Risk Assessment to inform the implementation of a comprehensive national counter financing of terrorism strategy.
• Ensuring the effective implementation of targeted financial sanctions and demonstrating an effective mechanism to identify individuals and entities that meet the criteria for domestic designation.

The potential implications of the greylisting range from higher interest rates and inflation, a weakening of the Rand (which has already been seen), reduced inbound foreign investment, less offshore investment and increased costs and delays due to greater compliance requirements for South African transactions.

Hopefully there are lessons to be learned from the Mauritian experience, where the government's efforts there led to its greylisting being removed within two years.

Authored by Laurie Hammond.