LexisNexis Risk Solutions has released a new publication, the South Africa FATF Mutual Evaluation 2021 Report. The report highlights the effectiveness of the country’s efforts in meeting the goals of the Financial Action Task Force (FATF), established by the G7 in 1989, in fighting money laundering and terrorist financing.
The 40 recommendations of FATF (https://www.fatf-gafi.org/publications/fatfrecommendations/documents/fatf-recommendations.html) make up a framework designed to prevent criminals and terrorists from abusing the financial system and depriving them of resources. The recommendations are aimed at financial institutions including banks, investment companies, payment service providers and insurance companies. Also included are other businesses and professions, such as casinos, real estate agents, legal professionals and others. And in keeping with the times, they also apply to crypto or virtual asset service providers.
Over 200 countries have committed to implementing the regulations. FATF carries out country assessments against its recommendations and publishes the results in Mutual Evaluation reports and Follow Up reports, which assess progress in addressing technical deficiencies.
This is the third evaluation South Africa has been through, which determines the country’s fundamentals when it comes to its anti-money laundering/terrorist financing (AML/CFT) systems.
According to the report, “FATF considers South Africa, as a G20 economy and a regional financial hub for sub-Saharan Africa, to have 'notable exposure' to the threat of foreign proceeds of crime in the region being laundered through or in the country.”
It further notes that South Africa ‘has a relatively high volume and intensity of crime and more than half of reported crimes fall into categories that generate proceeds'. Furthermore, 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'.
The report reviews four key areas of the FATF’s analysis of South Africa’s risks and defences, namely sanctions, customer due diligence, wire transfers and DNFBPs (designated non-financial businesses and professions). It also compares South Africa’s assessment of the FATF’s recommendations and Immediate Outcomes against other African nations and the G20.
A blunt summary of the 24-page report is that South Africa has a low level of effectiveness for preventing terrorism financing and a moderate level of effectiveness in preventing proliferation. “A number of failings around the targeted sanctions regime in South Africa were identified during the evaluation exercise, mostly due to inadequacies in the regulatory framework.”
There is, naturally, far more detail in the report than the above and readers can download the full report at https://risk.lexisnexis.com/global/en/insights-resources/white-paper/fatf-mutual-evaluation-4th-round-south-africa
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