Finance Minister Enoch Godongwana will be throwing more money into law enforcement agencies next year to shore up their financial crimes-busting capabilities in a bid to stave off the potential greylisting of South Africa in February 2023.
South Africa has a noose around its neck waiting for the Financial Action Task Force (FATF) to decide whether or not to greylist the country following the completion of a year-long observation period.
This follows a year-long observation period after the FATF identified serious weaknesses in South Africa’s anti-money laundering (AML) and Combating the Financing of Terrorism (CFT) framework in which the country scored a very poor ratings assessment on technical compliance, failing 20 of the 40 FATF recommendations.
Tabling his Medium-Term Budget Policy Statement (MTBPS) in Parliament yesterday, Godongwana said the government was doing everything necessary to prevent greylisting by the FATF.
Godongwana said the February 2023 Budget would have additional allocations to the budgets of the National Prosecuting Authority (NPA), the Special Investigating Unit (SIU), the Financial Intelligence Centre (FIC) and the SARevenue Service (Sars).
He said these resources would help the institutions to identify sophisticated financial crimes, prosecute offenders, and recover money and assets that were the proceeds of fraud and corruption.
“This 2022 MTBPS proposes additional resources to the budgets of the NPA, the SIU, the FIC and the Sars to further improve the capability of the state to investigate and prosecute sophisticated financial crimes,” Godongwana said.
The funding would enable the FIC to increase its human resource capacity and help the SIU initiate civil litigation following the recommendations of the State Capture Commission.
Funding would also be allocated to the NPA to increase capacity in specialised tax units and the Investigating Directorate, procure specialist prosecution services for complex matters, especially financial crimes, appoint forensic auditors and accountants to deal with high-priority asset forfeiture matters, establish a digital forensic data centre, and finance increased witness protection operational costs.
Sars would receive additional funds to improve information and communications technology capacity and revenue collection capabilities, and to report on tax administration digital resilience during the Covid-19 pandemic
“In addition, the government will also publish a revised national risk assessment strategy on anti-money laundering and terror financing,” Godongwana said.
Cas Coovadia, the CEO of Business Unity South Africa (Busa), said yesterday that the increased allocations to these agencies were critical, but might have come too late to prevent the greylisting.
“This sends out a clear message that law and order must be high up on the agenda, although this might be too late to avoid a greylisting,” Coovadia said.
Earlier this month, a study commissioned by the Business Leadership South Africa (BLSA) concluded that South Africa was facing an 85% probability of being “greylisted” by the FATF if it did not strengthen required mechanisms against money laundering and terrorist financing.
FATF is the international standard-setting body that oversees global compliance with anti-money laundering rules.
If this comes to pass, financial firms around the world, including banks, would be required to apply enhanced due diligence to any South African client, a process more invasive and extensive, to assess the source of funds and probity of clients.
Godongwana also said the National Treasury had already tabled two bills in Parliament which were aimed at addressing weaknesses in the legislative framework regarding AML and CFT, adding that these bills were expected to be enacted by the end of this year.
At the end of August, the Cabinet approved the much-anticipated General Laws (Anti-Money Laundering and Combating Terrorism Financing) Amendment Bill tabled before Parliament by Godongwana.
BUSINESS REPORT