The Department of Justice and Constitutional Development says it is working hard to ensure South Africa is not blacklisted by the Financial Action Task Force (FATF).
The FATF is an international initiative of the G7 countries to combat money laundering.
A FATF graylist would hamper South Africa’s ability to attract foreign investment and undermine investor confidence in the country.
Speaking at the Morgan Stanley Big Five investor conference, minister Ronald Lamola said any blacklisting would have “dire consequences for the country”.
“Chief among the consequences is the risk of reduced investor confidence and the negative impact on the financial well-being of South Africans. Although our economy is reaping the benefits of commodity growth, the effects of this growth are yet to manifest structurally.
“Thus, one can worry about the inclusion in the gray list [FATF] certainly, if not exacerbate our well-documented structural inequalities, then deepen. This will affect the cost of borrowing and raising capital for our country,” he said.
The FATF report highlighted concerns about fraud, corruption and other crimes in South Africa, and made adverse findings about South Africa’s ability to effectively combat money laundering and terrorist financing. Recommendations were also put forward.
The minister said that the department is actively responding to the findings and recommendations.
He said measures taken by the department include:
- Establishment of an Anti-Money Laundering (AML) Unit within the National Prosecuting Authority (NPA). The Bureau has developed the Division’s Anti-Money Laundering Strategy, which covers the investigation and prosecution of money laundering and terrorist financing.
- The processes of the NPA’s International Cooperation Division have been improved in relation to directions related to foreign predicate offences. The head office has increased staff.
- Mutual legal assistance (MLA) requests for state capture investigations were sent to several countries in 2018. These countries include USA, UAE, India, Canada, Netherlands and China.
- The NPA is investigating seven overseas bribery cases in which MLAs were referred to foreign authorities, demonstrating its willingness to deal with such cases through ongoing communication with foreign jurisdictions.
- Since 19 November 2019, the Asset Forfeiture Unit has been dealing with overseas prior offense cases involving fraud allegations, which is a key focus area for SA’s risk assessment.
- The AFU obtained eight conservations in seven cases worth 40.3 million rand and eleven forfeitures in ten cases worth 31.8 million rand.
“Cabinet of Ministers approved the bill on amending the General Laws (Combating Money Laundering and Terrorist Financing) [B18-2022] in Parliament…the Bill was referred to the Standing Committee on Finance and the Special Committee on Finance.
“The amendment bill aims to address deficiencies in at least fourteen of the twenty recommendations, including corresponding strengthening of the powers and procedures of regulatory bodies.
“A separate bill, the Constitutional Democracy Protection from Terrorism and Related Activities Amendment Bill, 2022, addresses two more (and major) recommendations. The four unimplemented flawed recommendations will be addressed through policy processes and mechanisms to be developed by October/November 2022,” he said.
The minister said these “interventions will provide a substantial response” to the FATF.
Read: Graylisting could be the wake-up call South Africa needs