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South Africa's Battle Against Greylisting Hampered by Non-Compliance

Published July 24, 2024
7 months ago


South Africa's aspiration to be removed from the grey list imposed by the global financial watchdog is facing constant obstacles. The Financial Intelligence Centre (FIC) has once again raised red flags over the continued non-compliance of certain entities, including legal practitioners, estate agents, and dealers in precious stones and metals. This behavior, according to the FIC, is directly undermining the nation's attempt to improve its credibility within the global economic system.


The FIC, a crucial body that analyzes and combats financial malpractice such as money laundering, has been issuing notices with intentions to penalize these uncooperative sectors. Christopher Malan, the centre's manager for compliance and prevention, issued a stern statement outlining the significant risks this lack of cooperation poses—not only to South Africa's reputation but also to the welfare of its citizens and businesses.


This issue surfaced following the FATF's greylisting of South Africa in February 2023, prompting urgent directives for targeted businesses to file a Risk and Compliance Return (RCR) questionnaire. This vital document is designed to assist the FIC in pinpointing which businesses are more susceptible to illicit financial flows. In a bid to enforce this, businesses were initially given a deadline of 31 May 2023 to comply.


Despite the urgency and the centre’s repetitive warnings, there remains a shortfall in compliance. As of September 2023, only 60% of legal practitioners and 66% of estate agents have met their reporting duties—a dismal improvement from earlier in the year. Trust service providers and company service providers depicted better compliance rates, at 74% and 76% respectively.


The situation is even more uncertain with sectors such as dealers in precious metals and stones, credit providers, and crypto asset service providers yet to submit answers by their extended 31 July 2023 deadline.


The sluggish response rates are not just numbers—they potentially impede the exit from the FATF's grey list, which the FIC and the South African Treasury have earmarked as a crucial goal for mid-2025. An exit from this list is seen as key to rekindling international investor confidence and aiding the nation's faltering economy.


Institutions that continue to disregard this obligation risk being categorized as high-risk entities, leading to thorough investigations or possible sanctions. This non-compliance, described by Malan as 'wilful', sends a disconcerting signal about the country’s commitment to combating financial crimes.


As South Africa struggles with economic challenges, the grey list's additional strain could lead to even more severe economic and social consequences. The FIC's revelations show a country at a crossroads; the path to recovery and reputation enhancement can be carved through collective adherence to financial directives, or be impeded by the inaction of a few.



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