“Greylisting is a concern to us, but a number of things are being done,” Justice Minister Ronald Lamola said in response to MPs’ questions at Thursday’s justice committee meeting.

“There has been progress that has been made by our authorities to avoid greylisting … All these are aimed at showing South Africa’s commitment.”

The justice minister’s comments come as the clock ticks down on South Africa addressing its noncompliance with 20 of 40 recommendations by the global anti-money laundering and terrorism financing monitoring entity, the Financial Action Task Force (FATF), outlined in its October 2021 report.

A final decision will be taken at the body’s February 2023 meeting on greylisting, which would increase the cost of investment, doing business and financial transactions because of additional due diligence. 

Business Leadership South Africa commissioned research that showed an 85% likelihood of greylisting. The report by consulting firm Intellidex recommended clear and determined communication, and political will, in a national effort led by the Presidency to show South Africa’s commitment, even if greylisted, to exit as soon as possible.

Read more in Daily Maverick: “SA at 85% risk of being greylisted, so determined political will needed – and learning from Mauritius: report”

Crucially, the FATF highlighted South Africa’s shortcomings in identifying risks as a regional financial hub with a large informal economy and cross-border cash movement, and failure to expand supervision of non-financial entities like estate agents, lawyers and Krugerrand dealers. 

The FATF also highlighted the need to fill 3,000 vacant Hawks specialist forensic and auditing posts and to make money laundering the focus of proactive investigations rather than a by-the-by charge in fraud or corruption cases.

After a massive outcry from civil society, Finance committee refuses to rubber-stamp greylisting bill

But few references to initiatives on money laundering, terrorism financing and other measures are found in key justice, security and economic portfolio 2021/22 annual reports. That’s even though these reports, which run from 1 April 2021 to 31 March 2022, cover a crucial period in the FATF process. 

“The National Prosecuting Authority has enhanced its focus on addressing money laundering linked to illegal wildlife trafficking. The NPA participated in the Financial Action Task Force typology study pertaining to this subject matter in 2020, resulting in the release of a FATF report in 2021,” says the prosecuting authority’s 2021/22 annual report. 

The annual report also refers to the establishment of the private-public working group, the South African Anti-Money Laundering Integrated Task Force, to enhance “collective understanding of financial crime trends”, assist coordination and boost successful investigations. 

A total of 86 money laundering verdicts were obtained, up from 44 in the 2020/21 financial year. It’s not clear if these are convictions or acquittals. But details of the case studies in the report support the FATF’s analysis that money laundering charges usually are add-ons to fraud and corruption charges brought under laws like the Prevention of Organised Crime Act.

But the NPA annual report also highlights what’s effectively South Africa’s second terrorism and terrorist activities-related conviction in the past decade – the case of the Thulsie twins. Under a February 2022 plea and sentencing agreement, Brandon Lee and Tony Lee Thulsie were jailed for eight and six years for conspiracy to carry out terrorist activities in South Africa and to join Islamic State in Iraq and Syria.

The previous terrorism conviction was that of Nigerian Henry Okah, who was jailed in connection with two explosions in 2o1o in Warri and in Nigeria’s capital Abuja. The FATF October 2021 report pointed out the singularity of the Okah terror and terrorism financing conviction was inappropriate for South Africa’s risk profile.

The 2021/22 annual report of the Financial Intelligence Centre (FIC), a key entity in an anti-money laundering and terrorism financing regimen that is required to conduct risk assessments reflects a historical account of the FATF process.

Except to also point out that because the FAFT identified nonprofit organisations as susceptible to terrorism financing and money laundering, it collaborated with the Department of Social Development to host 11 “awareness webinars on the risks involved and how to prevent failing prey to money laundering, financing of terrorism and other financial crimes”. 

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Over the past two years, it sent out questionnaires to attorneys, estate agents, Krugerrand dealers, motor vehicle dealers and others that it must supervise and assess for risk.

“Their responses were collated and analysed, and the FIC subsequently drafted reports on the money laundering risks inherent to these sectors, and also touched, to a lesser extent, on risks associated with the financing of terrorism,” according to the annual report.

“The FIC received four terrorist property reports in the reporting period,” says the annual report, without giving more details. Other numbers show how 45,555 registered accountable institutions submitted more than five million regulatory reports to the FIC.

More detailed on meeting the FATF noncompliance findings, was the South African Revenue Service (Sars) 2021/22 annual report, which talked of 14 work streams for the so-called Sars FATF programme. This “progressed well” on the strategic front, but not so much where resources like IT were needed. 

It’ll be a case of catch-up. 

“The mitigation actions that will be implemented, included the development of business requirement specification for the traveller declaration system, which will fast-track the system development,” was how the annual report described plans to introduce official declarations by travellers of the amounts of cash they are taking with them when leaving South Africa.

The SAPS 2021/22 annual report doesn’t mention the FATF. Anywhere.  

But what emerges from the 458-page report backs the global anti-money laundering and terrorism financing watchdogs findings on South Africa – money laundering is usually just one of several charges, alongside fraud and corruption, and not a specific investigative focus. 

In October 2021, four SAPS members went on a four-day anti-money laundering workshop, according to the SAPS annual report. That’s alongside a year-long programme sponsored by Russia to “train (police) members in new forms and methods of combatting terrorism and other manifestations of extremism”.

Russia provided R112,500 from 1 April 2021 to 31 March 2022; the SAPS spent R143,811. The “actual outputs achieved”, according to the annual report: “Two members trained.” DM