Title: South Africa’s Money Laundering Battle: Progress in Reversing Grey-Listing and Recovering Stolen Funds
Background
Following the publicized Judicial Commission of Inquiry into Allegations of State Capture, Corruption and Fraud in the Public Sector, South African regulatory authorities have taken steps to address corporate crime and the recoupment of ill-gotten gains. This action was prompted by the country’s grey-listing by the Financial Action Task Force (FATF) in February 2023.
Grey-Listing and AML/CFT Deficiencies
Identified deficiencies in South Africa’s Anti-Money Laundering and Countering the Financing of Terrorism (AML/CFT) framework led to the FATF grey-listing. This classification requires the government to work with the FATF to rectify these strategic deficiencies and places additional scrutiny on the country’s financial sector.
Progress Report
In November 2023, a progress report from the government outlined the following key achievements in addressing the State Capture scandal and regaining FATF’s trust:
- Referrals for investigation: 202 recommendations from the Zondo Commission have been referred to law enforcement agencies and professional bodies.
- Joint task force: A joint task force was established to coordinate investigative efforts, including the Financial Intelligence Centre (FIC) and the Special Investigating Unit (SIU).
- Enhanced NPA resources: The National Prosecuting Authority (NPA) budget was significantly increased, and the NPA Amendment Bill was tabled to strengthen the agency’s abilities.
- Asset recovery: Asset recovery proceedings have been initiated against entities implicated in state capture, with reported civil litigation totaling R64 billion and unpaid taxes being R4.8 billion.
Collaborative Efforts
Besides the joint task force, increased cooperation and collaboration have emerged among law enforcement and regulatory agencies in investigating corporate criminal activities. This response is driven, in part, by FATF’s focus on removing South Africa from the grey list, leading to better coordination and improvements in investigative resources.
Recent efforts
- SARS vs. Sasfin Bank: The South African Revenue Service (SARS) has pursued recovery proceedings against Sasfin Bank Limited, with R4.8 billion in damages claimed due to unlawful transfers totaling R8.2 billion over the past decade.
- Sasfin’s involvement: Sasfin admitted the involvement of former clients in a syndicate to facilitate illicit transfers, with former bank employees implicated. Criminal cases have been opened as a result.
Future Focus
Although progress has been made, it’s essential that South African authorities maintain political will to continue tackling state capture and reverse the FATF grey-listing. Regulatory compliance investigations remain a priority, with the financial services sector under increased scrutiny. Organizations must remain vigilant and proactive in conducting internal compliance monitoring and developing action plans to efficiently respond to investigations.
Contact the Regulatory & Investigations Team
For assistance with compliance audits or advice related to potential or ongoing investigations by regulators, please contact the Regulatory & Investigations Team: Ernie van der Vyver or Kate Swart.