Advanced technology solutions are playing a crucial role in strengthening South Africa’s fight against financial crime. Real-time data access, enhanced screening and alerting systems, and artificial intelligence-driven AML tools are enabling financial institutions to detect high-risk behaviours more effectively.
By integrating regulatory technology (RegTech) solutions, the country can streamline compliance, improve investigations, and meet the Financial Action Task Force’s (FATF) global standards.
South Africa remains one of 24 countries still on the Financial Action Task Force (FATF) greylist.
While the government has taken steps to be removed from FATF’s list of jurisdictions under increased monitoring, these measures may not be enough to remove the country.
Let’s take a look at FATF’s role in addressing anti-money laundering (AML) and counter-terrorist financing (CTF) protocols across the globe, the history of South Africa’s greylisting, what government has done so far to improve financial crime controls, and what still needs to be done to meet the regulations imposed by global watchdogs.
What is FATF’s role?
FATF is a global money laundering and terrorist financing watchdog committed to preventing organised crime, corruption, and terrorism. It’s an intergovernmental body that harmonises AML and CTF standards worldwide, and more than 200 countries and jurisdictions are committed to implementing its frameworks.
When a nation fails to implement FATF’s Recommendations satisfactorily, it may be referred to the International Co-operation Review Group (ICRG). Failing three or more “Core Recommendations” is cause for concern, while low compliance with nine or more of the 11 “Immediate Outcomes” will see a jurisdiction placed under supervision.
Suppose a country has strategic deficiencies in its AML/CFT framework and is not progressing sufficiently. In that case, it may be placed on the greylist (the Jurisdictions under Increased Monitoring list). This can damage a nation’s global reputation, investment flows and ability to transact seamless international transactions.
Greylisting is typically the outcome of a long process. Here’s how it unfolded for South Africa:
- 2019 visiting assessment: FATF submits 67 recommendations for improving AML/CTF in South Africa, including conducting compliance according to risk profiles, better detecting illicit payments, cooperating internationally, and increasing the use of intelligent financial technology.
- Evaluation report, October 2021: FATF identifies 12 key findings and shortcomings, giving South Africa a year to progress AML compliance efforts.
- 2022 progress update: FATF recognises significant progress since the initial 2019 check. This includes the passing of two significant amendments to anti-fincrime legislation.
- Strategic deficiencies, January 2023: FATF reduces the 67 recommended actions to eight “strategic deficiencies”, including further legal assistance and better use of data from the Financial Intelligence Centre (FIC) for law enforcement investigations.
- Greylisting in February 2023: South Africa is instructed to continue to address the eight risk areas through 22 action items after missing its deadline for full adherence.
South Africa makes headway — but is it enough?
Moving off the grey list is a complex endeavour that requires coordination between local government bodies, institutions, and regulators. In the past two years, the government has worked closely with FATF to address its action points, making some progress but also encountering a few roadblocks.
The South African government has implemented legal and institutional frameworks for targeted financial sanctions, provided risk-based tools for high-risk non-financial businesses, updated the Terror Financing National Risk Assessment, and allocated more significant resources for regulatory authorities.
It has also urged increased usage of FIC intelligence data. However, the FIC’s increased crackdown on risk and compliance returns by accountable institutions saw only 20,000 or so submissions out of a total of 35,110 in September last year, which requires improvement.
In 2024, the Presidency and Business for SA identified crime and corruption as areas requiring private sector optimisation. Since then, the National Prosecution Authority (NPA) has established a standalone digital evidence unit composed of experts from the private sector to help analyse complex digital investigations.
The country has primarily addressed 16 of the intended 22 action items to date, setting a better path to leaving the greylist. But significant issues remain in the six outstanding tasks:
● Beneficial ownership: Greater transparency around the structures of companies and trusts is needed to prevent risk from owners who may have ties to sanctioned countries and lists, politically exposed persons, or terrorism.
● Sanctions: South Africa still lacks effective measures to enforce sanctions against entities that fail AML/CTF compliance requirements.
● Penalising cases: amending or enacting laws is only half the battle; arguably, the most pertinent ongoing problem is South Africa’s appetite for investigating and prosecuting those guilty of serious crimes, where even corruption cases backed with hard evidence have seen little authoritative action.
Technology: the light at the end of the tunnel?
Many of the advancements enacted to date rely on more accurate investigative intelligence. The FIC’s outstanding risk reports and the NPA’s supervision indicate a need to streamline audit trails. It is here where regulated institutions can play their part by providing real-time access to data.
Screening and alerting customer or vendor information against up-to-date ownership records or sanctions lists is vital to achieving the FATF’s action items. Advanced AML solutions will enable financial institutions to identify high-risk behaviours and entities faster, more effectively, and more scalable from the onboarding stage onwards – where eventual action from law enforcement must be increased in reported crime cases where prosecution is required.
Moving off the FATF greylist (and staying on the right side of compliance) requires the cooperation and sustained responsibilities of every accountable company, governmental body, regulator, and the broader judicial system. Integrated regulatory technology (RegTech) solutions offer a democratised and affordable way for all regulated entities to adopt and achieve FATF’s global AML compliance standards for investigations and continued reporting to relevant authorities past the due date.
Following FATF’s February 2025 deadline, an assessment in May could see South Africa removed from the greylist by June at the earliest. Beyond this, South Africa should be forward-thinking, adaptable, and actionable in contributing to a global coalition that builds formidable defences against financial crime.
Bradley Elliott, CEO of Anti-Money Laundering (AML) platform RelyComply. He writes in his personal capacity.
