Financial Crime World

South Africa’s Financial Crime Risk Assessment Reveals Shocks

A recent assessment of South Africa’s measures to combat money laundering and terrorist financing has uncovered significant shortcomings, including a failure to pursue serious cases. The International Monetary Fund (IMF) staff-led assessment, conducted jointly with the Eastern and Southern Africa Anti-money Laundering Group (ESAAMLG), reviewed the effectiveness of South Africa’s measures in combating financial crime.

South Africa’s Vulnerability

As a G20 economy and regional financial hub for sub-Saharan Africa, South Africa is exposed to various risks, including:

  • The laundering of domestic crime proceeds
  • Foreign crime proceeds from the region
  • Terrorism financing risks associated with foreign terrorism, foreign terrorist fighters, and potential domestic terrorism

Assessment Findings

The assessment highlighted several key findings, including:

  • A failure to pursue money laundering and terrorist financing in line with South Africa’s risk profile
  • The need for law enforcement agencies to proactively investigate money laundering or terrorist financing
  • Limited skills and resources available to investigate these crimes
  • Successes in confiscating criminal proceeds, but challenges in recovering assets from “State Capture” cases and those that have moved to other countries

Recommendations

The assessment made several recommendations for improvement, including:

Financial Intelligence

  • Improve the use of financial intelligence by working proactively with international partners to detect and seize illicit cash flows
  • Enhance the availability of beneficial ownership information

Risk-Based Approach

  • Apply a risk-based approach by businesses and supervisors
  • Close gaps in sectoral coverage

Conclusion

The report was adopted by the Financial Action Task Force (FATF) at its June 2021 Plenary meeting. The assessment highlights the need for South Africa to strengthen its measures to combat money laundering and terrorist financing, particularly in addressing “State Capture” corruption practices and improving financial intelligence gathering.