The Financial Action Task Force (FATF) announced on Friday that South Africa will be placed under increased monitoring and placed on the so-called ‘grey list’.
Countries under increased monitoring must improve their anti-money laundering and counter-terrorist financing (AML/CFT) regimes. The decision to place South Africa on the ‘greylist’ was based on the progress made relating to the list of recommendations by FATF in October 2021. Our government addressed many of the recommendations. Measures introduced included the General Laws Amendment Act. However, the FATF found that government needed to demonstrate more progress.
Is greylisting permanent?
The FATF regularly reviews the progress made by countries under increased monitoring and may lift the monitoring status. For example, Botswana was placed on the grey list in 2018, and Zimbabwe in 2019. Within three years, both countries were removed.
South Africa must succeed in addressing the requirements of FATF so putting the required measures in place should be a priority.
What does greylisting mean for accountants?
There may not be a direct impact on accountants due to greylisting. Still, there is a range of possible economic and reputational consequences for South Africans, including:
- The scarred international reputation may raise costs for banks and asset managers, making it less attractive as a destination for tourism, trade, and investment
- Weakening of the Rand – after the decision was announced, the rand slumped 1.2% against the dollar
- Difficulty in accessing international financial services, including loans, trade finance, and correspondent banking relationships
- Reduced foreign investment as foreign investors are hesitant to invest in the country due to the perceived risk of money laundering or terrorist financing.
- Increased scrutiny can be expected from regulators and law enforcement agencies, both domestically and internationally. This can increase regulatory burdens on businesses and individuals in the country.
What can we do as accountants?
The new GLA Act created requirements for companies, trusts, NPOs, and financial institutions. Reporting on beneficial ownership information is one of these requirements. Therefore, accountants must do their part to ensure that clients understand and comply with the regulations.
You can read more on the new requirements for trusts here and for companies here.
You can also read more in the AW article here.