BACKGROUND
The Financial Action Task Force (FATF) is a global, inter-governmental body which promotes policies and sets international standards relating to Anti-Money Laundering (AML) and Combating Terror Financing (CTF). Their process is to publicly list those countries whose administrations’ actions to combat these issues are inadequate/inefficient. Two main tools FATF uses to do this are the greylist and the blacklist. In essence, the greylist is a mechanism to identify those countries with strategic deficiencies in their systems to counter financial crimes, but who still portrays a willingness to address those weak points. The blacklist on the other hand, lists countries with serious strategic deficiencies to counter AML and CTF.
On 23 February 2024, FATF has identified:
- 3 “high-risk” jurisdictions (placed on the blacklist), i.e. Democratic People’s Republic of Korea, Iran and Myanmar.
- 28 jurisdictions under increased monitoring (the greylist), of which South Africa is one.
IMPLICATIONS OF SOUTH AFRICA BEING ON THE GREYLIST
Fundamentally, one of the main consequences of SA’s greylisting is reputational risk. Being on the greylist sends a strong international message about the country’s internal systems, which has a high potential of negatively impacting investor confidence and international cooperation. In summary, this means that less capital will be flowing into the country and any transactions with South African companies and individuals will be deemed as higher risk – automatically triggering more complex compliance and administrative procedures.
HOW DOES THIS IMPACT THE FINANCIAL SERVICES INDUSTRY
The next question that needs to be addressed, is the consequent impact on financial advisors and the financial services industry in South Africa. In a nutshell, greylisting subjects the financial services industry to increased scrutiny and stricter regulations to ensure that it addresses the deficiencies in its AML/CFT systems.
For a financial services provider, that is also defined as an accountable institution and registered with the Financial Intelligence Centre (FIC), this means the requirement to implement Client Due Diligence measures to combat money laundering and terrorism financing.
For Delta4 this means that for every transaction a (current or potential) client enters into and is facilitated by Delta4, we would have to conduct a due diligence of the client and a scrutiny of the client against a sanctions’ list published by FIC. This whole process includes obtaining documents such as:
- Proof of Identity,
- Proof of Address
- Bank Account details
Should all of the abovementioned factors lead to the client showing as a low risk client and transaction, only then will Delta4 be able to proceed with facilitating the planned transaction.
CONCLUSION
FATF has identified eight areas of strategic deficiencies for South Africa that we have to improve in order to be considered for being taken off the greylist. According to the National Treasury 2023 SA FATF Greylisting Fact Sheet, we have to address these issues by no later than January 2025. Given this information, Delta4 looks forward to increasing our internal due diligence in line with the FIC and POPIA measures in order to play our part in having SA potentially removed from the greylist.
Disclaimer
These materials are provided for general information purposes only and do not constitute legal or other professional advice. While every effort is made to update the information regularly and to offer the most current, correct and accurate information, we accept no liability or responsibility whatsoever if any information is, for whatever reason, incorrect, inaccurate or dated. We accept no responsibility for any loss or damage, whether direct, indirect or consequential, which may arise from access to or reliance on the information contained herein.
© Copyright Delta4 Financial Services. All Rights reserved.