Africa-Press – South-Africa. South Africa is running out of time to convince the Financial Action Task Force (FATF) that it has adequate measures to combat money laundering and terrorist financing.
The country has to address all strategic deficiencies by the end of June 2025 for a possible removal from FATF’s greylist in October 2025.
By the end of February 2025, South Africa had only two out of 22 action items left unaddressed. The government had previously aimed to exist the list by mid-2024.
South Africa was placed on FATF’s greylist in February 2023 after being given several warnings from the international organisation.
In 2021 FATF had already highlighted significant gaps in South Africa’s ability to investigate and prosecute money laundering, corruption, and terrorism financing.
The regulatory body pointed to weak enforcement of existing laws and limited convictions in high-profile corruption cases, particularly those linked to state capture, as key concerns for South Africa.
South Africa has made progress since then, but remains on the greylist, due to weak measures to combat money laundering and terrorist financing, in particular.
In its latest economic survey of the country, the Organisation for Economic Co-operation and Development (OECD) warned that the longer South Africa stays on the list, the worse the impact will be on the local economy.
The OECD warned that staying on the greylist past October 2025 may pose a significant risk to financial stability as it increases scrutiny on local financial institutions from foreign counterparts.
This raises processing, monitoring, and reporting costs, though the OECD did say that the impact on South Africa’s financial markets appears to have been limited so far.
The organisation said that South Africa has to address all strategic deficiencies in its anti-money laundering and terrorist financing measures by June 2025 for possible removal in October in 2025.
It said that the swift implementation of these action items will help maintain the attractiveness of investing in South African assets.
Greylist headache
Finance Minister Enoch Godongwana is working hard to introduce reforms to South Africa’s existing legislation on anti-money laundering and terrorist financing.
This has included focusing on specific sectors of the South African economy, such as microlending, gambling, and real estate.
Microlending, in particular, has proven to be a hotbed for money laundering and fraud, with them handling millions of small transactions from clients who may not have traditional banking background or formal credit histories.
For example, criminals increasingly exploit microlending services to take out multiple loans under different identities because they lack robust customer verification processes.
Microlenders also traditionally offer loans with relatively flexible terms, which usually means there is less scrutiny around how the loan will be used. This enables criminals to easily divert funds to pay for unlawful activities.
In 2024, Finance Minister Enoch Godongwana revealed the sectors at the highest risk of money laundering in South Africa, which include:
The gambling sector
Property practitioners
Legal practitioners
High-value dealers
Money remittance businesses
Informal networks of money transfer services
The general use of cash
In its latest update, the FATF said that South Africa has made a high-level political commitment to aligning its practices with global requirements since February 2023.
South Africa has taken steps towards improving its anti-money laundering regime, including implementing and updating its supervisory risk assessment tools.
The country has also enhanced the capacity of relevant authorities, particularly SARS and the Financial Sector Conduct Authority (FSCA).
SARS has made significant changes to its process of clearing funds transfers outside the country. This has implications for high-net-worth individuals and businesses.
South African tax residents can still take up to R1 million out of the country, no questions asked. However, any amount above that must go through SARS’ new Approval of International Transfer clearance process.
This process is much more thorough and stringent than its predecessor, with applicants required to provide more information and additional documentation.
In effect, getting money into and out of South Africa is much more difficult.
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