South Africa removed from Financial Action Task Force (FATF) grey list

The Financial Action Task Force (FATF), the international anti-money laundering watchdog, removed South Africa from its ‘grey list’ of countries following a successful on-site review of its Anti-Money Laundering and Countering the Financing of Terrorism (AML/CFT) regime in July.

The delisting reflects comprehensive reforms implemented since 2023, including expanded regulation under the Financial Intelligence Centre Act, enhanced beneficial ownership transparency, stricter reporting obligations and improved enforcement capacity.

South Africa was placed on the grey list in February 2023 after the FATF identified significant weaknesses in its anti-money laundering and counter-financing of terrorism framework. These included gaps in enforcement, transparency around beneficial ownership and asset recovery processes.

The FATF welcomed South Africa’s significant progress in strengthening the effectiveness of its AML/CFT regime to meet the commitments in its 22-point Action Plan by:

• Demonstrating a sustained increase in outbound Mutual Legal Assistance (MLA) requests that help facilitate 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 & Professions (DNFBPs) and demonstrating that all AML/CFT supervisors apply effective, proportionate and effective sanctions for non-compliance.
• 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.

As part of a comprehensive reform programme, the South African government passed the General Laws (Anti-Money Laundering & Combating Financial Terrorism Financing) Amendment Act 2022 and the Protection of Constitutional Democracy Against Terrorism & Related Activities (POCDATARA) Amendment Act in December 2022.

These addressed 15 of 20 deficiencies relating to the adequacy of laws and legal frameworks that were identified in the mutual evaluation report. Further actions then undertaken to address deficiencies include:

• Expanding the scope of accountable institutions under the Financial Intelligence Centre (FIC) Act 38 of 2001 to bring crypto-asset service providers and high-value goods dealers into scope.
• Strengthening beneficial ownership transparency through amendments to the Companies Act 71 of 2008 and launching the Companies & Intellectual Property Commission’s Beneficial Ownership Register, which requires the disclosure of interests of 5% and above and blocks annual returns without prior BO filings.
• Improving enforcement capacity through increased funding for the Directorate for Priority Crime Investigation (DPCI) – generally known as the ‘Hawks’ – and the National Prosecuting Authority.
• Imposing stricter reporting obligations under sections 28 and 29 of the FIC Act, including cash threshold reporting and suspicious transaction reporting.
• Amending the Prevention & Combating of Corrupt Activities Act 12 of 2004, including the creation of a new offence for the failure to prevent corrupt activities by private companies and state-owned entities.

South Africa must continue to work with the FATF and Eastern & Southern Africa Anti-Money Laundering Group (ESAAMLG) to sustain the improvements in its AML/CFT system.

“South Africa’s progress in addressing the AML/CFT deficiencies and exiting the FATF grey list is a significant achievement,” said Sovereign South Africa Ralph Wichtmann. “But it is only the start of a broader process to continue to strengthen key institutions, improve enforcement and governance processes, and to ensure that these improvements are maintained.

“The FATF delisting will result in reduced compliance, increased access to global banking services and a more straightforward basis for cross-border transactions. But businesses and investors will also be required to maintain robust risk-based compliance programmes, ensure accurate beneficial ownership disclosures and perform enhanced due diligence for high-risk transactions.”