South Africa says it is addressing deficiencies that led to grey listing

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The South African government is working hard to address deficiencies in the fight against organised crime and illegal financial flows, said Minister of Finance Enoch Godongwana.

“Since February, when South Africa was grey listed by the Financial Action Task Force (FATF), a large number of government departments and agencies – including the police and the Hawks, National Prosecuting Authority (NPA), Special Investigating Unit (SIU), State Security Agency (SSA), the Reserve Bank, Financial Sector Conduct Authority (FSCA) and South African Revenue Service (SARS) – have been working hard to address these deficiencies,” the Minister said.

Delivering the Medium Term Budget Policy Statement on Wednesday in Parliament, he said last week the FATF noted at its plenary meeting that such work is showing positive results.

South Africa has addressed 15 of the 20 technical deficiencies in its legal framework and has made good progress on 17 of the 22 effectiveness action items, including two that are now deemed to be largely addressed.

“However, there is also a significant amount of work that must still be done, particularly with regard to the investigation and prosecution of complex money laundering cases and terror financing, the identification of informal mechanisms for remitting money around the world, and the recovery of the proceeds from crime and corruption,” the Minister said.

Government expects to address all the deficiencies identified by the FATF by early 2025.

In February 2023, the FATF grey listed South Africa based on a 2019 evaluation conducted and a 2021 report. In 2021, South Africa was put under a one year observation period, allowing the country to address 67 of the recommended actions. The report identified South Africa as a country with strategic deficiencies in combatting money laundering and stopping the flow of finance to terror groups.

FATF is a global inter-governmental body promoting policies and setting international standards to combat money laundering, terrorist financing and financing the proliferation of weapons of mass destruction.

“We are also devising ways to make better and more targeted use of the Criminal Asset Recovery Account (CARA) to address crime. Among these efforts, and emanating from the Presidential project on illicit mining strategy, a recommendation has been made for Cabinet to consider using money from the fund to combat illegal mining.

“The South African Police Service, The Defence Force, the Financial Intelligence Centre, the Department of Home Affairs and the Border Management Authority have all received allocations from this fund,” the Minister said.

Improving efficiencies

He said over the Medium Term Expenditure Framework (MTEF) period, the focus is on improving efficiency and reprioritising funds towards key programmes.

The SAPS will contain costs and streamline operations as headcounts decline due to natural attrition.

“It will foster partnerships with communities and implement reforms to optimise resource allocation, training and technology. Government will continue to fill critical posts in the Border Management Agency and verify assets transferred from departments to the agency.

“To reduce employee compensation pressure, the Department of Defence will implement human resource reforms and review commuted overtime and allowance policies. Furthermore, funds will be reallocated in the Department of Defence to provide for day-to-day maintenance and emergency repairs,” the Minister said.

The Department of Justice and Constitutional Development will reallocate funds over the MTEF period to capacitate the Office of the Legal Services Ombud.