The big hurdle South Africa must jump to get off the greylist

For South Africa to get off the Financial Action Task Force’s (FATF’s) grey list, the country has to significantly ramp up its money laundering convictions – one of the biggest issues that led to being put on the list in the first place.

Partners at law firm Webber Wentzel presented this view in a podcast about South Africa’s efforts over the past year to meet its goal and delist by June 2025.

Kirsten Wolmarans, a partner at the firm, said that one of the biggest issues which got the country in the FATF’s sights is because “our convictions in the money laundering space are not consistent with our risk profile.”

South Africa was put on the FATF grey list on 24 February 2023 for not fully complying with international standards around the prevention of money laundering, terrorist financing and proliferation financing.

Immediately after the announcement, the rand depreciated by 1.12% against the US dollar.

Challenges in convictions

“Despite [efforts to redress issues], I have seen challenges still persist, particularly in achieving higher conviction rates,” said Wolmarans.

As such, progress may be seen as stunted because “conviction rates serve as a crucial indicator of progress” for the FATF.

“It is clear that South Africa’s money laundering conviction rates remain well below desired levels which raises questions about the effectiveness of our enforcement actions and, importantly, about our judicial processes,” she added.

Since 2020, 51 people and 43 entities have been convicted for various crimes, including corruption, fraud, tax evasion, money laundering and others.

Wolmarans said this represents a fraction of the number of cases – many of which do not see the light of day.

It was argued that one of the most significant shortcomings has been the effectiveness of the National Prosecuting Authority’s (NPA) cases pertaining to these issues.

“Reform is needed, as cases are being thrown out or not even pursued to the point of seeing the inside of a courtroom due to relatively simple issues such as delays and poor investigative skills,” said Wolmarans.

An example used by Wolmarans was the R2.2 billion fraud, corruption, and money laundering case involving a former Eskom CEO and seven other co-accused in connection with the awarding of a multibillion rand contract for the construction of Kusile Power Station.

On 22 November, the Middelburg Specialised Commercial Crimes Court agreed with the accused’s arguments and struck the case off the roll due to unreasonable delays in the completion of the investigation

“This is just a single high-profile case that I have pointed out, but I can assure you that there are copious other cases which never actually see the light of day due to [reasons relating to capicity].”

Louis Botha, a senior associate previously Cliffe Dekker Hofmeyr, said that there are two broad challenges that the NPA faces when conducting investigations and prosecuting offenders in a large case – capacity and expertise.

“The NPA is still very much in a process of rebuilding capacity, having more prosecutors, but also people who are skilled enough to prosecute these crimes,” says Botha.

Despite these criticisms, the partners did say that there is light at the end of the tunnel and emphasised that there is a large push by both the public and private sectors to make improvements.

This includes seeing reforms at the NPA by seeking to advance alternative dispute resolutions – like its new policy of Deferred Prosecution Agreement.

Since the greylisting, a lot of legislative change has been undertaken; including amendments to existing laws, enhanced enforcement mechanisms and increased collaboration with international partners.

These include:

• The introduction of the General Laws Amendment Bill;

• Promotion of partnerships between different law enforcement, investigative and regulatory agencies;

• The amendment of many financial sector regulators’ mandates to give better supervisory and enforcement powers;

• Amendment of the National Prosecuting Authority Act by providing, among others, for the establishment of an Investigating Directorate against Corruption (IDAC);

• Establishment of the Fusion Centre, which has recovered R1.75 billion in criminal assets since its inception.

SOURCE:The big hurdle South Africa must jump to get off the greylist – BusinessTech