85% Chance of South Africa being Grey Listed
In terms of these amendments, the prescribed amount for reporting cash transactions under section 28 of FICA to the Financial Intelligence Centre has increased from ZAR24 999 to ZAR49 999.99. Aggregation is no longer applied in the calculation of the threshold amount. In other words, the threshold will simply be a threshold pertaining to a specific transaction and not a series of transactions.
Cash transactions above this threshold must be reported under section 28 of FICA to the Financial Intelligence Centre as soon as possible but not later than three days after becoming aware of a fact of a cash transaction that has exceeded the threshold.
These amendments come amidst much speculation regarding South Africa being grey listed by the Paris-based Financial Action Task Force (“FATF”) when it meets in February 2023. Grey listing indicates risk that the rest of the world attaches to South African companies and individuals as counter-parties to transactions.
A recent report by Business Leadership SA has concluded that the chances of such grey listing for South Africa are 85%. According to the report South African clients will then become subject to enhanced due diligence, which will mean more frequent and more invasive assessments for anti-money laundering and combatting of terrorism financing measures risks. This will lead to higher costs for South African businesses and individuals that trade internationally and have bank and investment accounts abroad.
In addition, managing correspondent banking and global infrastructure provider, such as payment providers, relationship relationships will come at a higher cost to banks. It is estimated that the impact of these costs would result in a decrease in Gross Domestic Product of between 1% to 3%.
A serious and urgent Government-wide effort to fully implement the FATF’s recommended actions to comply with all FATF requirements would mean that a grey listing will be short-lived. However, if South Africa is perceived as being inactive in addressing the FATF’s concerns, the costs will be high.
The South African government is taking steps to avoid being grey listed by introducing amendments to the financial regulatory system. To this end, Treasury has tabled the General Laws (Anti-Money Laundering and Combating Terrorism Financing) Amendment Bill to address the deficiencies identified by the FATF in its Mutual Evaluation Report in October 2021.
The bill aims (among other things) to provide for the disclosure of the beneficial owners and the ultimate controllers of trusts, companies and non-profit organisations. Amendments to the definition of accountable institution as set out in Schedule 1 of FICA are being addressed by means of a separate legislative process.
As the deadline for these deficiencies to be addressed fast approaches, we can only hope that the measures that the country is putting in place will be enough to get us of the FATF’s radar.
Executive Banking and Finance
Executive Banking and Finance
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