SA on track to exit ‘dirty money’ watchlist – Treasury

South Africa is on course to exit a global dirty money watchlist next year but challenges remain in addressing system shortcomings, according to the National Treasury. SA has until February to address items flagged by the Financial Action Task Force (FATF) to get off the so-called grey list by June 2025, reports Fin24. It was listed early last year after getting poor marks for its efforts to combat money-laundering and terrorism financing, denting the country’s reputation amid investor concern over an economic outlook already dimmed by sluggish growth, crime and corruption. The FATF published an update on SA’s progress last week, noting that since the country made a high-level political commitment to change in February 2023, significant progress has been made towards improving its anti-money laundering and combating the finance of terrorism regime. These steps have included implementing and updating supervisory risk assessment tools for Designated Non-Financial Businesses and Professions (such as real estate agents), updating its terrorist finance risk assessment, and enhancing the capacity of relevant CFT authorities.

The Daily Maverick reports that the Financial Intelligence Centre earlier this year pleaded with law firms and real estate agents to urgently submit their risk and compliance returns. According to the FATF, its assessments show that the real estate sector often has poor understanding of the risk of real estate being used to launder criminal profits and regularly fails to mitigate them. ‘The sector needs to take appropriate measures to adequately mitigate these risks. This includes effective customer due diligence measures, such as access to information about the true, beneficial owner(s) of the real estate transaction,’ the FATF says. As part of the changes, the Financial Intelligence Centre granted an 18-month transition period to the end of June 2024. All newly identified accountable institutions must ensure complete adherence to FICA regulations or face potential public reprimand and fines ranging from R10m to R15m. Hawken McEwan, director of compliance at DocFox, says this affects, for example, high-value goods dealers who trade in single physical objects valued at R100 000 or more. Examples include Krugerrands (gold, platinum or silver), vehicles, yachts, electronics, machinery, precious metals, gems, jewellery, antiques and artwork.

If all the action items have been addressed by January 2025, the FATF joint group is expected to visit SA in April or May 2025 to confirm its progress and, if satisfied, will recommend that the country is removed from the grey list. If there are action items still outstanding by 25 January, SA will continue reporting to the FATF every four months, until all the deficiencies have been addressed. In the next reporting cycle, SA is required to address nine of the outstanding action items that are due in September 2024. DM notes that the final five action items are due in January 2025. Treasury yesterday said it remains a tough challenge to address all 14 of the remaining ‘Action Items’ by February 2025. The watchdog initially identified 22 areas that the country needs to tackle, of which eight have since been completed. SA still has two reporting cycles due in September 2024 and January 2025 to address outstanding issues. It aims to complete nine of them by September, with the rest due in January. It needs to get all of them done to exit the grey list by June 2025. ‘Agencies and authorities will need to continue to demonstrate significant improvements,’ Treasury cautioned.

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