Budget speech must not forget to touch on progress made to exit greylist
Johannesburg, 16 February 2024 - With the upcoming Budget Speech on 21 February 2024, National Treasury must not forget to talk about the progress made to exit the greylist. Walter Bhengu, Project Director for Legislation and Governance at the South African Institute of Chartered Accountants (SAICA), takes a deep dive into what has been done so far to ensure that South Africa can exit the greylist by January 2025.
Until recently, most people did not know what a greylist was, only after South Africa was greylisted in February 2023 did this become something of interest to them. One year on, the Financial Intelligence Center (FIC), National Treasury, Companies and Intellectual Property Commission (CIPC), and the Masters Office, to name a few, have been working around the clock to ensure that South Africa is off the greylist by January 2025. The Financial Action Task Force (FATF), which is the body that put South Africa on the greylist will evaluate to determine if sufficient measures have been put in place and how effective they are.
Therefore, one major thing that needs to be tracked is progress made on exiting the greylist. In the February State of the Nation Address, the President stated that:
“We have taken steps, including through new legislation, to strengthen our ability to prevent money laundering and fraud and secure our removal from the greylist of the Financial Action Task Force.”
While in the November mid-term budget speech, the Minister of Finance highlighted that:
“Since February, when South Africa was greylisted by the Financial Action Task Force (FATF), a large number of government departments and agencies – including the police, the Hawks, NPA, SIU, SSA, the Reserve Bank, FSCA, and SARS – have been working hard to address these deficiencies.”
SAICA cannot overemphasise how critical it is for business to come on board to work with the regulators to ensure that the exit from the greylist happens sooner rather than later. 2023 was mostly used for putting legislative mechanisms in place, as well as systems and processes to facilitate the changes. The General Laws Amendment Act made changes to the Trust Property Control Act, Companies Act, and Financial Intelligence Centre Act and it meant that the Master’s Office, CIPC and FIC had to publish guidance for businesses while introducing new systems. 2024 is the year of ensuring that the guidance and systems are up and running effectively and efficiently. The FIC has recently raised concerns that some businesses are not coming to the party in terms of complying with new FIC processes such as submitting a risk and compliance return. A risk and compliance return is information regarding a company’s understanding of money laundering, terrorist financing, and proliferation financing risks within their business. This non-compliance by some businesses may lead to South Africa getting a dim FATF report in May.
In November 2023, FATF published a progress report on how guidance and systems have been introduced and rolled out since the greylisting. It was not an assessment of the effectiveness of the measures; that will only come towards the end of the year. A summary of 22 key FATF recommendations which were in the red (meaning non-compliant or partially compliant) in October 2021 have now moved down to 5 in the red which shows there is partial compliance, with no non-compliance highlighted. The country dares not regress since the hope is to exit the greylist in January 2025.
It is important to ensure that money laundering and illicit outflow of capital are curbed to ensure, even if we put greylisting aside, that foreign investment does not dry up. Efforts to deal with this, include:
- a fusion center has been put together to combine skills from different investigative and law enforcement agencies such as the Hawks, SARS and the NPA
- the FIC, CIPC and Masters Office continue to work together with assistance from National Treasury
- The South African Anti-Money Laundering Integrated Task Force, which is a public-private partnership between the FIC, Prudential Authority, banks and other parties, continues to do work to counter terrorist financing and money laundering.
The efforts behind the scenes must continue and it must be “all hands on deck” from the government, business and each relevant stakeholder. Here’s to hoping that South Africa can exit the greylist by January 2025. It is possible, but a lot of hard work still lies ahead.
About SAICA
The South African Institute of Chartered Accountants (SAICA), South Africa’s pre-eminent accountancy body, is recognised as the world’s leading accounting institute and is home to the leading CA designation in the world The Institute provides a wide range of support services to more than 50 000 members and associates who are chartered accountants (CAs[SA]), as well as associate general accountants (AGAs[SA]) and accounting technicians (ATs[SA]), who hold positions as CEOs, MDs, board directors, business owners, chief financial officers, auditors and leaders in every sphere of commerce and industry, and who play a significant role in the nation’s highly dynamic business sector and economic development. the
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