200-member FATF, based in Paris, aims to create the mandatory political will to bring about national legislative and regulatory reforms in these areas.
To prevent the nation from being placed on the Financial Action Task Force (FATF), the world organisation that monitors money laundering and terrorism funding, the South African government has urgently changed some of its legislation. The 200-member FATF, which has its headquarters in Paris, attempts to create the required political will to bring about these types of national legislative and regulatory reforms.
General Laws (Anti-Money Laundering and Combating Terrorism Financing) Amendment Bill has been introduced in Parliament by the Minister of Finance, and now the procedure for gathering public input, holding hearings, amending the Bill, and enacting it will take place. According to a statement made public by the Treasury, this showed the South African government's dedication to fighting money laundering and countering the financing of terrorism (AML/CFT) and resolving the issues raised in the FATF's Mutual Evaluation Report (MER) of South Africa, which was released in October 2021.
When passed into law, it will strengthen South Africa's compliance with global best practises for battling financial crime and corruption, according to the Treasury. Due to South Africa's extremely low rating in its mutual evaluation, the country has been put into an enhanced follow-up phase that requires more regular reporting to the FATF until all shortcomings have been corrected.
Also given a one-year observation period was South Africa (from October 2021 to October 2022). South Africa must submit its first follow-up report to the FATF at the end of August 2022 and its second report in October 2022 as part of the follow-up procedure in order to be ready for the FATF Plenary in February 2023. A public FATF grey listing is expected to have the impact of making doing business with overseas trading partners more expensive for South African companies.
Through an Interdepartmental and Agency Committee on AML/CFT, which is headed by the Director-General of the National Treasury, National Treasury has been working closely with representatives from the Departments of Justice and Constitutional Development, Trade, Industry and Competition, Social Development, the Financial Intelligence Centre, the Companies and Intellectual Property Commission, and the South African Revenue Service to develop an action plan to stop greylisting.
The South African government has also gotten technical support from the World Bank and the European Union in order to learn from other nations' mistakes and improve the AML/CFT system in order to better combat financial crime and corruption and avoid the country being placed on a "grey list."
All revisions across various Acts have been consolidated into a single omnibus Bill to ensure that the essential laws are passed as quickly as possible in order to meet the requirement to demonstrate progress in our report back to the FATF. At least 14 of the 20 recommendations are intended to be fixed by the Amendment Bill, including the proper improvement of the practises and capabilities of regulatory authorities.
Two further recommendations are covered by a different bill called the Protection of Constitutional Democracy against Terrorist and Related Activities Amendment Bill, 2022. The Treasury stated that by developing policy processes and mechanisms by October/November 2022, the remaining four inadequate suggestions will be addressed.
The statement acknowledged that South Africa would have the more difficult task of proving the effectiveness of its laws and frameworks, including proving that the nation has reliable national risk assessments to deal with money laundering and terror financing, aside from successfully addressing all or the majority of the 20 technical deficiencies by the end of the year. Treasury came to the conclusion that it is crucial for the nation to show in the following six months that it has significantly improved in relation to the FATF's shortcomings.