Financial Intelligence Centre failing South Africa
17 June 2022
In October 2021, the Financial Action Task Force (FATF) warned South Africa that it needs to improve the prosecution of financial crimes and listed shortcomings in South Africa’s ability to identify and report illegal cash flows and crime.
The Financial Intelligence Centre (FIC) is South Africa’s national centre for the gathering, analysis and dissemination of financial intelligence and is meant to investigate suspicious transactions that might be the proceeds of crime, money laundering or the funding of terrorism.
The FIC Act was intended to bring South Africa’s legal framework against money laundering and the financing of terrorism in line with the international standards set by the FATF of which South Africa is a member.
All bank account holders will know the onerous requirements that are imposed on them by their financial institutions to prove their identity, residential address and the source of their funds. Despite these onerous conditions placed on ordinary South Africans, FATF is not satisfied that enough is being done given the amount of illicit cash. Recent revelations about US dollars stuffed into the furniture of SA’s President will do nothing to ease the concerns of FATF.
FATF placed South Africa on a one-year watch list and, if not sufficiently improved by October this year, South Africa will be added to the “grey list” of countries that pose a threat to the international financial system, such as Burkino Faso, Haiti, Mali, South Sudan, Syria and Yemen.
At an urgent meeting of the Standing Committee on Finance this week, National Treasury advised that they and FIC were in Berlin at FATF, to “keep South Africa off the grey list”. They proposed various amendments to the FIC Act and indicated that these need to be urgently passed by Parliament to satisfy the FATF. In response to the DA’s questions the National Treasury and FIC agreed that they had not responded quickly enough to the FATF warning and that time was running out to avoid sanctions.
If South Africa does not meet the FATF requirements within the next four months and is subsequently grey listed when FATF discusses South Africa in February 2023, South African banks and other financial institutions will in effect be excluded from being able to transact internationally with dire consequences for our economy, already on its knees. South African financial institutions may also face heavy fines by foreign regulators.
The DA has submitted questions to the Minister of Finance to request an explanation of why this arose, why the warning was not urgently attended to and what steps are being taken to avoid the grey listing.
Issued by Dion George, DA Shadow Minister of Finance, 17 June 2022
