FATF reports South Africa’s progress in AML measures

Thursday, 30 November 2023
A Financial Action Task Force (FATF) follow-up report on South Africa's anti-money laundering (AML) regime has found significant improvements in many respects, although some areas remaining in partial compliance will keep it under increased monitoring until the next FATF report in October 2024.

FATF's latest report says the country has made progress in addressing most of the technical compliance deficiencies identified in the mutual evaluation of June 2021. That evaluation rated it non-compliant with five of FATF's 40 recommendations and only partially compliant with 15. Those deficiencies resulted in South Africa being placed in 'enhanced follow-up' and in February 2023 it was added to the FATF list of jurisdictions under increased monitoring for AML weaknesses. The decision risked subjecting South Africans with bank accounts overseas to enhanced due-diligence, with increased difficulties in opening offshore bank accounts or investing offshore.

The latest report is the first follow-up in which South Africa has sought re-ratings. It has resulted in FATF upgrading the country on 20 recommendations.

Recommendations 5 and 23 have been upgraded from partially compliant to fully compliant. These refer respectively to the existence of an offence of terrorist financing and to the regulation of designated non-financial businesses and professions (DNFBPs).

Recommendations 1, 7, 10, 14, 18, 22, 24, 25, 26, 27 and 28 have been upgraded from partially compliant to largely compliant. These recommendations mostly refer to customer due-diligence, money transfer services, foreign branches, beneficial ownership transparency and supervision powers.

Recommendation 12 on politically exposed persons is upgraded from non-compliant to largely compliant.

Recommendation 17, regarding firms' reliance on third parties, is changed from non-compliant to ‘not applicable’, because regulated institutions in South Africa are no longer allowed to delegate their AML compliance to third parties.

Recommendations 6 (terrorism-related sanctions), 8 (non-profit organisations) and 15 (virtual assets) have been upgraded from non-compliant to partially compliant.

A notable success is the re-rating to largely compliant of the key Recommendations 24 and 25, regarding beneficial ownership transparency of legal persons and arrangements. South Africa has made considerable efforts in 2023 to meet the demands set out by FATF in February 2023, which emphasised the importance of 'enforcing the rules on giving competent authorities timely access to accurate and up-to-date beneficial ownership information'. Laws requiring compulsory registration of trust and company beneficial ownership took effect on 1 April 2023 and a strict enforcement programme began on 1 October 2023.

However, FATF has noted that the jurisdiction is still only partially compliant on five of its recommendations. It will therefore remain in enhanced follow-up until the next report in October 2024. The five recommendations that still need work are 2, 6, 8, 15 and 32; referring to national coordination of AML efforts, targeted financial sanctions related to terrorism, non-profit organisations and new technologies such as virtual currencies and cash couriers.


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