South Africa's measures to combat money laundering and terrorist financing

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English

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Mutual Evaluation Report South Africa-2021

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Mutual-Evaluation-Report-South-Africa.pdf
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Paris, 7 October 2021 - South Africa has a solid legal framework to fight money laundering and terrorist financing but has significant shortcomings implementing an effective system, including a failure to pursue serious cases.

The International Monetary Fund staff-led assessment comprehensively reviews the effectiveness of South Africa’s measures to combat money laundering and terrorist financing, and their level of compliance with the FATF Recommendations as at the time of the on-site visit in November 2019. The FATF adopted this report at its June 2021 Plenary meeting. This was a joint assessment with the Eastern and Southern Africa Anti-money Laundering Group (ESAAMLG) which also adopted the report in September 2021.

South Africa is a G20 economy and a regional financial hub for sub-Saharan Africa. Its banks offer a diverse suite of products and are the main entry point to the financial system. South Africa is exposed to the laundering of domestic crime proceeds and foreign crime proceeds from the region. It is also exposed to terrorism financing risks associated with foreign terrorism, foreign terrorist fighters (FTFs), and potential domestic terrorism.

South Africa needs to pursue money laundering and terrorist financing in line with its risk profile, including so-called “State Capture”, the corruption practices involving businesses and politicians conspiring to influence South Africa’s decision-making process to advance their own interests. It helped generate substantial corruption proceeds and undermined key agencies with roles to combat such activity. Recent initiatives have started to address the situation, including replacing key staff and increasing resources at law enforcement and judicial agencies.

The country’s Financial Intelligence Centre effectively produces operational financial intelligence. Law enforcement agencies use this for criminal investigations and to trace assets but lack the skills and resources to proactively investigate money laundering or terrorist financing.

While authorities carry out some successful money laundering investigations, the proactive identification and investigation of laundering networks and professional enablers is not really occurring.

South African authorities have achieved some good results confiscating criminal proceeds. However, they have struggled to recover assets from ‘State Capture’ and proceeds that moved to other countries.

The widespread use of cash is a high risk for money laundering and terrorist financing, including across borders. Detecting and recovering cash proceeds of crime remains challenging while efforts to prevent false or undeclared cross-border currency movements needs major improvement.

South Africa must also make better use of financial intelligence. It needs to proactively work with international partners to detect and seize illicit cash flows. It must improve the availability of beneficial ownership information, improve the application of risk-based approach by businesses and supervisors and close gaps in sectoral coverage.

The FATF adopted this report at its June 2021 Plenary meeting.

Technical Compliance

Ratings which reflect the extent to which a country has implemented the technical requirements of the FATF Recommendations.

South Africa Mutual Evaluation - 2021

R.1 - Assessing risk & applying risk-based approach
PC
R.2 - National cooperation and coordination
PC
R.3 - Money laundering offence
LC
R.4 - Confiscation and provisional measures
LC
R.5 - Terrorist financing offence
PC
R.6 - Targeted financial sanctions related to terrorism & terrorist financing
NC
R.7 - Targeted financial sanctions related to proliferation
PC
R.8 - Non-profit organisations
NC
R.9 - Financial institution secrecy laws
LC
R.10 - Customer due diligence
PC
R.11 - Record keeping
LC
R.12 - Politically exposed persons
NC
R.13 - Correspondent banking
LC
R.14 - Money or value transfer services
PC
R.15 - New technologies
NC
R.16 - Wire transfers
LC
R.17 - Reliance on third parties
NC
R.18 - Internal controls and foreign branches and subsidiaries
PC
R.19 - Higher-risk countries
LC
R.20 - Reporting of suspicious transactions
LC
R.21 - Tipping-off and confidentiality
C
R.22 - DNFBPs: Customer due diligence
PC
R.23 - DNFBPs: Other measures
PC
R.24 - Transparency and beneficial ownership of legal persons
PC
R.25 - Transparency and beneficial ownership of legal arrangements
PC
R.26 - Regulation and supervision of financial institutions
PC
R.27 - Powers of supervisors
PC
R.28 - Regulation and supervision of DNFBPs
PC
R.29 - Financial intelligence units
LC
R.30 - Responsibilities of law enforcement and investigative authorities
C
R.31 - Powers of law enforcement and investigative authorities
C
R.32 - Cash couriers
PC
R.33 - Statistics
LC
R.34 - Guidance and feedback
LC
R.35- Sanctions
LC
R.36 - International instruments
LC
R.37 - Mutual legal assistance
LC
R.38 - Mutual legal assistance: freezing and confiscation
LC
R.39 - Extradition
LC
R.40 - Other forms of international cooperation
LC

C = compliant   |   LC = largely compliant     |   PC = partially compliant   |   NC = non-compliant

Effectiveness

Ratings that reflect the extent to which a country's measures are effective. The assessment is conducted on the basis of 11 immediate outcomes, which represent key goals that an effective AML/CFT system should achieve.

Ratings that reflect the extent to which a country's measures are effective. The assessment is conducted on the basis of 11 immediate outcomes, which represent key goals that an effective AML/CFT system should achieve.

South Africa Mutual Evaluation - 2021

IO1
ME
IO2
ME
IO3
ME
IO4
ME
IO5
LE
IO6
ME
IO7
ME
IO8
ME
IO9
LE
IO10
LE
IO11
ME

HE = high level of effectiveness   |   SE = substantial level of effectiveness    |   ME = moderate level of effectiveness   |   LE = low level of effectiveness

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