National Treasury on 29 February 2024 published a media statement highlighting the recent update by the Financial Action Task Force (FATF) regarding South Africa's efforts to enhance its anti-money laundering (AML) and combating the financing of terrorism regime (CFT). This update follows the conclusion of the February 2024 FATF Plenary meetings, and sheds light on the progress made by South Africa in its attempt to reverse its grey-listing. 

South Africa was grey-listed by the FATF in February 2023 due to identified deficiencies in its AML/CFT regime. To exit the grey list, South Africa is required to address 22 action items outlined in the jointly agreed Action Plan. The deadlines for addressing these action items span from January 2024 to January 2025. 

The latest report by the FATF Joint Group indicates significant progress by South Africa in addressing the identified deficiencies. Five out of the 22 action items have been either fully addressed or largely addressed. These achievements include: 

  1. Implementation of legal provisions criminalising terrorist financing (TF);
  2. Strengthening of targeted financial sanction regimes related to TF and proliferation financing;
  3. Enhancement of the utilisation of financial intelligence from the Financial Intelligence Centre (FIC) to support money laundering investigations; and
  4. Augmentation of resources allocated to AML/CFT supervisors. 

South Africa faces imminent deadlines to address the remaining action items in the Action Plan. It is required to address the following action items by May 2024:

  • Demonstrate a sustained increase in outbound mutual legal assistance (MLA) requests and timely follow up to help facilitate money laundering (ML) and TF investigations and confiscations of different types of assets in line with its risk profile;
  • Improve risk-based supervision of Designated Non-Financial Businesses and Professions (DNFBPs) by implementing and keeping up-to-date supervisory risk-assessment tools to identify higher risk DNFBPs as a basis for risk-based supervision;
  • Strengthen AML/CFT supervisory capacity (human and financial resources) of the Financial Sector Conduct Authority (FSCA) and the FIC;
  • The South African Police Service (SAPS) should demonstrate a sustained increase in proactive requests for financial intelligence from the FIC for its ML/TF investigations;
  • Review and update its TF Risk Assessment;
  • Enhance the capacity of the relevant authorities, including SAPs and the National Prosecuting Authority by providing each agency with adequate training, personnel and financial resources to effectively carry out their CFT roles and responsibilities;
  • Implement a legal and institutional framework for targeted financial sanctions (TFS) by: 
    • addressing the R.6 deficiencies identified in the Mutual Evaluation Report (MER) consistent with the FATF Standards (ie deficiencies in respect of targeted financial sanctions related to terrorism and TF);
    • addressing the R.7 deficiencies identified in the MER consistent with the FATF standards (ie deficiencies in respect of targeted financial sanctions related to proliferation).

Additional actions must be completed by September 2024, with the balance due in January 2025.  

National Treasury has noted that, whilst 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, and that all relevant agencies and authorities will need to continue to demonstrate significant and sustained improvements. 

A list of the required action items and the associated deadlines are contained in the media statement published by National Treasury.

South Africa’s agencies and authorities have recently taken various high profile enforcement actions against non-compliant entities, and a raft of legislative amendments have been passed by the legislature in relation to AML/CFT, demonstrating the country's commitment to addressing its short-comings, in order to reverse its grey-listing as soon as possible. 

Whilst it remains to be seen whether the deadlines set by FATF will be met, as the tight deadlines make this challenging, the concrete efforts demonstrated across various agencies and spheres of government are encouraging.