The Greylisting status of South Africa - how are we doing
South Africa is having trouble getting off the FATF's grey list. This is mainly because of problems in two industries.
South Africa was placed on the FATF grey list in February 2022. This was due to their inadequate efforts in preventing illegal money transfers and combating terrorism financing.
The European Union added South Africa to a list of high-risk countries in May, causing practical effects to be felt.
Christopher Malan works at the Financial Intelligence Unit (FIC). He stated that South Africa's attempts to be removed from the grey list are hindered by legal practitioners and estate agents. Malan made these remarks at a media event held on Wednesday. He shared this at a media event on Wednesday.
The FATF flagged these sectors as easy avenues to launder money and hence they are the industries that would be more difficult to being up to the compliance level required.
South Africa has identified 22 action items that need to be met by set deadlines in order to get off the greylist.
But two out of the 22 action items are struggling because legal practitioners and estate agents are not following the rules.
Directive 2A identifies risky entities, while directive 2B investigates them.
However, companies have hampered directive 2A by not filling their risk and compliance returns (RCRs). This limitation then affects directive 2B because high-risk entities have not been identified yet.
Out of 16,000 legal offices registered with FIC, only about half have submitted their RCRs.
Only 43% of the 9,000 estate agent offices registered with FIC have submitted their RCRs. This is making the situation worse for estate agents.
This is despite the FIC hosting webinars and contacting regulatory bodies to ensure greater compliance across industries.
The FIC fined entities R50,000 for missing deadlines to improve compliance with regulations.
This is the first time the FIC is asking for an RCR from these sectors. It should be easy to complete because no new information is needed.
Time-sensitive
The FIC needs to make sure directive 2A is met by May this year, making the issue very time-sensitive.
The FIC will meet with a FATF committee of African and Middle Eastern nations to talk about its progress. Then, in June, they will meet with the leaders of the FATF in Paris.
If the May deadline is not met, it will harm the country's chances of getting off the grey list next year. Additionally, it will be impossible to meet the September deadline for directive 2B. This will also make it impossible to meet the September deadline for directive 2B.
People in law and real estate could be hurt if they don't follow the rules. They might be seen as bad businesses and not serious about stopping money laundering.
As per the FATF’s rules, South Africa will have to ensure that it meets all 22 directives to get off the grey list.
The FATF gave South Africa until January 2025 to fix its problems. All changes must be completed by November so that reporting to the FATF can be done in December and January.
South Africa is working to get off the grey list. Many believe the country will meet the deadline of January 2025 despite current challenges.
If directive 2A problems are fixed, the FIC and others can meet the deadline for all 22 directives.
Let's hope that those yet to comply come to the table and play their part in helping South Africa get off the grey list. This has far reaching consequences for all South Africans who are already struggling in the current economy.
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