“Ramaphosa: South Africa’s Dedication to Fighting Financial Crime and Corruption”

The removal of our nation from the Financial Action Task Force (FATF) grey list has a positive effect on the integrity and image of our financial system, increases our attractiveness as an investment destination, and overall benefits the economy.

The FATF is a global organization dedicated to combatting money laundering and terrorist financing. In 2023, South Africa was placed on the ‘grey list’ for failing to meet certain international standards.

Read/listen:
South Africa is off the dirty-money grey list
SA is off the grey list, but will this stop corruption?

In just over two years since the FATF highlighted vulnerabilities that made South Africa more prone to financial crimes, a committed multidisciplinary team led by the National Treasury has effectively facilitated our formal exit from the grey list.

In its announcement, the FATF recognized the ‘significant progress’ South Africa has achieved in improving its anti-money laundering and counter-terrorism financing framework, urging continued advancements in these areas.

This milestone enhances South Africa’s international reputation and global standing. Being on the grey list labels a country as a risky investment. The practical implications include challenges in obtaining credit and accessing international financial services, which can lead to lower foreign direct investment, possible capital outflows, and limitations on cross-border transactions.

Read: De-shackling from the grey list [Dec 2024]

International investors seeking to do business with any country require assurance that its financial sector is clean, transparent, resilient, and adheres to global standards.

The perception of heightened financial risk impacts both citizens and businesses. A weakened currency can result in increased living costs and operational expenditures. As international borrowing becomes more expensive for both businesses and governments, there is reduced fiscal space for social initiatives, leading to higher tax burdens. Investor caution culminates in diminished foreign direct investment, negatively affecting job creation and the stability of existing employment.

The outcome of South Africa’s removal from the FATF grey list will relieve pressure on citizens, businesses, and the government.

In the long term, restoring global financial confidence and improving risk perceptions will attract more foreign direct investment. As our currency strengthens, the cost of living for our citizens and the costs of doing business will see a positive change.

The extensive regulatory and institutional reforms implemented during the FATF process emphasize South Africa’s commitment to improving the business and investment climate, along with ongoing reform initiatives.

In 2022, the mandate of the Financial Intelligence Centre was expanded through robust legislation, allowing for more effective monitoring and detection of complex financial crimes.

Changes in legislation have been made to enforce stricter reporting requirements regarding beneficial ownership, allowing us to identify who ultimately owns, controls, and benefits from a company, rather than just listing shareholders on paper.

These modifications will significantly hinder individuals and syndicates from concealing the proceeds of corrupt activities through intricate networks of shell corporations, trusts, and entities owned by acquaintances and family members.

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To close high-risk gaps related to terrorist financing, we have enacted regulatory changes to streamline investigations and prosecutions in such instances. We are allocating additional governmental resources to combat money laundering and terrorist financing.

The era of state capture nearly dismantled state capacity and undermined key institutions tasked with maintaining the integrity of our financial system. However, we are steadily rebuilding these structures.

Read:

From grey list to clearer conscience by next October? [Sep 2024]

‘Fraud and corruption without consequences undermines business’ [Aug 2024]

Our exit from the grey list signifies that our anti-money laundering system is starting to effectively target corruption and other financial crimes. This lays a foundation for future improvements and reflects our collective determination to leave past wrongdoings behind.

We will ensure that the FATF decision does not lead to complacency, but instead encourages greater vigilance.

There is still much work to be done in preventing and addressing financial crimes and in facilitating investigations, prosecutions, and convictions against offenders.

With essential regulatory frameworks in place, our focus must now shift toward enhancing and solidifying their implementation. We will also continue to enforce regulations in both the public and private sectors while deepening international cooperation.

Read/listen:
What our FATF exit teaches us about effective reform
Is SA poised for a rerating?
Are the FIC’s teeth sharp enough to combat corruption?

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