A report released by the Financial Action Task Force (FATF) in October last year flagged key weaknesses in parts of South Africa\u2019s financial regulations that risk the country being greylisted. <\/p>\n\n\n\n
According to the report, South Africa has emerged as a hub for money laundering and the financing of terrorist activities due to rampant corruption and inabilities in the criminal justice system. It recommends the need for authorities to improve South Africa\u2019s legal and regulatory framework against financial crimes.<\/p>\n\n\n\n
November was the deadline for South Africa to avoid being greylisted in February 2023.<\/p>\n\n\n\n
When a country is added to the grey list, it means that it is under increased monitoring by the FATF. South Africa will be deemed a high-risk jurisdiction to transact with, and the FATF will require additional steps for potential investors. <\/p>\n\n\n\n
Banks will need to spend more money on managing correspondent banking relationships and on relationships with global infrastructure providers in South Africa.<\/p>\n\n\n\n
It seems that in the past year, South African authorities have not acted fast enough to implement the recommendations from the FATF report to avoid the possible greylisting. In response to the report from the FATF, the South African Reserve Bank\u2019s Prudential Authority published a banking sector review in July 2022, in which it found that the country\u2019s biggest banks were at high risk of being used for nefarious purposes by external and internal parties. <\/p>\n\n\n\n
Government was attempting to steamroller two pieces of legislation before the deadline of November. The one piece of legislation is the General Laws (Anti-Money Laundering and Combating Terrorism Financing) Amendment Bill, which makes amendments to four key financial acts, changing wording and responsibilities to better secure the country\u2019s financial systems from money laundering and terrorism financing. The second is the Protection of Constitutional Democracy Against Terrorist and Related Activities Amendment Bill, which will expand policy and investigatory powers and loosen the definition of terrorist activity. <\/p>\n\n\n\n
Greylisting could see South Africa shut out of certain financial markets, which would negatively affect the wider economy and particularly consumer prices.<\/p>\n\n\n\n
However, the proposed amendments that act as efforts to avoid the greylisting, may also pose significant challenges for businesses. In particular, the proposed amendments to the Financial Intelligence Centre Act (Fica) regarding broadening the scope of \u201caccountable institutions\u201d implies that both small and large businesses will now need to comply with the new regulations, placing extra administrative burdens and operational costs on businesses. <\/p>\n\n\n\n
Increased compliance costs result in the increase in product costs, which is ultimately passed onto the consumer. With this inevitability on the horizon, the crucial aspect now is for authorities to minimise the impact of this on the financial sector and the economy.<\/p>\n\n\n\n
\n A report released by the Financial Action Task Force (FATF) in October last year flagged key weaknesses in parts of South Africa\u2019s financial regulations that risk the country being 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\n )<\/span> Dr Celeste Campher is a lecturer in the department of Economics and Finance at the University of the Free State (UFS).<\/i><\/p>\n","protected":false},"excerpt":{"rendered":"