In 2023, the Financial Action Task Force (FATF) grey-listed South Africa. Here’s why, and what has been happening since…
What is the FATF and grey-listing?
The Financial Action Task Force (FATF) is the global standard-setter in combating money laundering and terrorist financing. The grey list is the list of jurisdictions around the world that have been flagged by the FATF for increased monitoring, as a result of identified deficiencies in their anti-money laundering and terrorism-financing standards.
At the time of our grey-listing, a jointly agreed action plan outlined 22 areas with specific deficiencies which needed to be addressed for South Africa to be removed from the grey list. The target date for addressing these items is early 2025.
How is that action plan working out so far?
Significant progress has been made, but there’s still much work to be done before South Africa can be removed from the grey list. According to the FATF update in February 2024, five out of the 22 required action items had already been addressed or were largely resolved. This leaves 17 outstanding action items, with 14 partly addressed and three not yet tackled. The National Treasury department’s February 2024 media statement acknowledged the challenge of addressing all 17 remaining action items by February 2025, but expressed confidence in staying on track to meet the deadline.
What is the effect of grey-listing on your financial affairs?
Grey-listing requires all financial institutions worldwide to conduct additional due diligence when transacting with South African individuals and entities. As a result, we have noted a surge in information requests regarding proof of source of funds/wealth and the ultimate beneficial owners of entities such as trusts, particularly in transactions involving offshore platforms.
Several accountable institutions have also had Financial Intelligence Centre Act (FICA) inspections by regulators, some which have led to substantial fines for non-compliance. In one notable instance, a fund manager received a R16 million penalty for FICA non-compliance.
A heartfelt, ongoing thank you – for YOUR compliance!
As you can see, ignoring compliance requests is a costly mistake. As an accountable institution, the management team at Netto Invest have acted to enhance our FICA processes to align with the grey-listing and legislative changes. We know that we send you regular requests to provide updated FICA information and that it can feel repetitive and burdensome, but as the law gives us no option, we do thank you most sincerely for your cooperation in providing the necessary documentation.
Your understanding is invaluable and we will continue to partner with you in compliance and all else, as an inevitable part of your financial planning journey.
By Cameron McCallum, CFP® CA(SA)