Financial Crime World

South Africa Falling Short on Terrorism Financing Laws, Says IMF Report

A G20 Economy with Significant Weaknesses

JOHANNESBURG - Despite having a solid legal framework to combat money laundering and terrorist financing, South Africa has significant shortcomings in implementing an effective system, according to a report by the International Monetary Fund (IMF) staff-led assessment.

Key Findings of the Report

  • Risk Profile: South Africa is exposed to the laundering of domestic crime proceeds and foreign crime proceeds from the region, as well as terrorism financing risks associated with foreign terrorism, foreign terrorist fighters, and potential domestic terrorism.
  • Implementation Gaps: The country has struggled to effectively implement its anti-money laundering (AML) and combating the financing of terrorism (CFT) measures, with serious shortcomings in investigating and prosecuting cases.
  • Asset Recovery: While South African authorities have achieved some good results in confiscating criminal proceeds, they have struggled to recover assets from “State Capture” corruption schemes and proceeds that moved to other countries.

Challenges Facing Law Enforcement Agencies

  • Skills and Resources: Law enforcement agencies lack the skills and resources to proactively investigate money laundering or terrorist financing.
  • Financial Intelligence: The Financial Intelligence Centre’s operational financial intelligence is not being effectively used to identify and investigate laundering networks and professional enablers.

Recommendations for Improvement

  • Risk-Based Approach: Implement a risk-based approach by businesses and supervisors to improve the effectiveness of AML/CFT measures.
  • Beneficial Ownership Information: Improve the availability of beneficial ownership information to facilitate investigations and prosecutions.
  • Sectoral Coverage: Close gaps in sectoral coverage to ensure that all industries are subject to effective AML/CFT regulations.
  • International Cooperation: Proactively work with international partners to detect and seize illicit cash flows.

Conclusion

South Africa has been given the opportunity to address these concerns and improve its AML/CFT measures. If left unaddressed, the shortcomings highlighted in the report could lead to a higher risk of money laundering and terrorist financing activities in the country.