South Africa and its greylisting by the FATF – Where are we one year later?

It has been more than one year since South Africa was officially greylisted by the Financial Action Task Force (FATF) in February 2023.  The FATF is a global body that aims to combat global money laundering and terrorist financing.

Our official greylisting followed an earlier report issued by the FATF in 2021, which highlighted several deficiencies in its assessment as well as action points to be taken.  It allowed South Africa one year to show progress in adhering to these points or face the risk of being greylisted.  Unfortunately, the steps taken by South Africa had fallen short of this expectation, and our official greylisting followed in February last year.

Greylisting, now a well-known term for many South Africans, is a practice where a country with serious anti-money laundering (AML) and counter terrorist financing deficiencies (CTF) is publicly identified and subjected to increased monitoring by the FATF.

Since February 2023, government together with government agencies such as the Financial Intelligence Centre, the South African Revenue Services, Department of Justice and The Companies and Intellectual Property Commission, has taken rigorous steps to address the issues raised by the FATF. (Readers are welcome to refer to our relevant articles in this newsletter around CIPC developments and compliance requirements for trusts.)

These steps include, amongst other things, the implementation of beneficial ownership reporting for companies and trusts (“Beneficial Ownership Reporting Deadline and Online Process for Directors’ Amendments” here) and the broadening of the definition of Accountable Institutions in Schedule 1 to the Financial Intelligence Centre Act (FICA).  Accountable Institutions have specific responsibilities they need to fulfil in terms of FICA.

The list of what is considered accountable institutions is available here and we appeal to all business owners to evaluate their current business practices against this criteria as the penalties and implications for non-compliance are severe.

One specific item which has been broadened in Schedule 1 is the inclusion of a Trust and Company Service Provider (TCSP), which has created quite a stir in the accounting industry.  A TCSP is a business that assists its clients with the creation, operation and management of a company, a close corporation, or a trust. It took some time for the FIC to provide clarity on numerous questions raised by industries and organisations impacted by this change.  A Public Compliance Notice was issued during the later part of 2023.  Any person who performs the activities of a TCSP, regardless of their processional accreditation, is considered an accountable institution and must register as such with the FIC.

Although we want to assure clients that FICA and compliance thereto is nothing new to us, as certain service elements have already fallen in the ambit of the previous definitions, these changes to Schedule 1 and TCSPs have broadened the scope of FICA on the diverse range of services we offer.  We are fortunate that we are able to rely on our existing processes and infrastructure to seamlessly ensure that we comply with these requirements.

Clients and prospective clients can expect us to obtain certain additional information for FICA purposes either prior to onboarding (for prospective clients) or on a regular basis (for existing clients). This information will include items necessary to help us in identify and verify client identities in accordance with the FICA requirements.  Rest assured that our capable team will guide you through the process.

In the meantime, South Africa has until January 2025 when the FATF will review its decision to greylist the country and assess the public and private sector measures taken to address its concerns.

Clients are encouraged to reach out to their dedicated client relationship manager should they have any questions regarding this matter.