Financial Crime World

SANCTIONS AND FINANCIAL CRIME: SOUTH AFRICA’S TOUGH ROAD AHEAD

South Africa’s Struggle Against Money Laundering and Terrorist Financing

South Africa, a G20 economy and regional financial hub for sub-Saharan Africa, is exposed to both domestic and foreign crime proceeds. Its banks offer a diverse range of products, making them the main entry point to the country’s financial system.

Vulnerabilities in South Africa’s Financial System

Despite having a solid legal framework, South Africa’s authorities have failed to pursue serious cases related to money laundering and terrorist financing. A recent report by the International Monetary Fund (IMF) has highlighted significant shortcomings that hinder the country from implementing an effective system against these crimes.

Shortcomings Exposed in IMF Report

The IMF-led assessment reviewed South Africa’s measures against money laundering and terrorist financing as at November 2019. The Financial Action Task Force (FATF), an intergovernmental organization that sets global standards for anti-money laundering and combating the financing of terrorism, adopted the report at its June 2021 Plenary meeting.

Key Findings:

  • South Africa’s authorities have not pursued serious cases related to money laundering and terrorist financing.
  • The country has vulnerabilities in its financial system, including widespread use of cash and lack of effective cross-border currency controls.
  • Authorities have struggled to recover assets from “State Capture” and those that have moved to other countries.

Recommendations for Improvement

The report emphasized the need for South Africa to:

  • Make better use of financial intelligence
  • Work proactively with international partners to detect and seize illicit cash flows
  • Improve the availability of beneficial ownership information
  • Apply a risk-based approach by businesses and supervisors
  • Close gaps in sectoral coverage

Addressing Corruption Practices

Recent initiatives aimed at addressing corruption practices known as “State Capture” include replacing key staff and increasing resources at law enforcement and judicial agencies. However, more needs to be done to address the issue.

Conclusion

South Africa must take concrete steps to address money laundering and terrorist financing cases in line with its risk profile. Only then can the country effectively combat these crimes and maintain a strong financial system.