How greylisting came about

The slowly unfolding train crash culminated on Friday when the Financial Action Task Force (FATF) placed South Africa on its list of jurisdictions under increased monitoring, colloquially referred to as the greylist. 

This is after the government failed to convince FATF that it has made enough progress in addressing all the deficiencies previously identified. Finance Minister Enoch Godongwana hinted in his Budget Speech this week that greylisting was a strong likelihood. 

In order to address some of the deficiencies, President Cyril Ramaphosa signed into law the General Laws (Anti-Money Laundering and Combating Terrorism Financing) Amendment Act in January.,

This bill amended the Companies Act, The Financial Intelligence Center Act, The Financial Sector Regulation Act, the Non-Profit Organisations Act and the Trust Property Control Act.

These amendments will affect many accountants.

How greylisting has affected other countries

In a note to its members last year, SAIBA’s experts explained that greylisting “could make doing business with the country even tougher. In effect, the country would become a ‘high-risk jurisdiction to transact’, requiring anyone wanting to do business with South Africa to jump through an additional layer of compliance hoops.”

National Treasury notes that falling onto the list will, “have the effect of increasing the cost of doing business for South African businesses with foreign trading partners.”

Julian Bonnici, a journalist, based in Malta explains that when the island was greylisted in 2021, most people didn’t feel the direct impact. However, for those working inside financial services companies, it created a “bureaucratic nightmare”, especially for smaller companies, which have less capacity to meet regulatory demands. Business owners and the self-employed found it tough to open bank accounts due to “rigorous due diligence checks following Malta’s greylisting.”

How greylisting will affect accountants

Perhaps what accountants will notice first is not so much greylisting, but the legislative changes enacted in order to try and prevent it.

In its note to members, SAIBA points out that, “It [The General Laws Amendment Bill]  will require additional record keeping and disclosure by 2 000 000 Trusts, NPOs and Companies.” For accountants, it’s crucial to ensure that they have adequate KYC (know your client procedures) in place.

Why greylisting is not a Hotel California situation

Malta escaped greylisting after a year. Mauritius was greylisted in February 2020, but by October 2021, it escaped the list. Bowmans notes, “A high-level political commitment was made by the Government of Mauritius to swiftly resolve the identified strategic deficiencies within agreed timeframes.”

Closer to home, Botswana was placed on the grey list in 2018, and Zimbabwe in 2019. Within three years, both countries were removed. Cambodia and Morocco came off the list today.

However, there is no guarantee that countries that suffer from greylisting will recover quickly.

Every greylisting cloud has a silver lining

No one wishes for South Africa to be greylisted, however compliance manager James George told BusinessTech last year, “Going grey was a good thing for Mauritius and could be for South Africa as well – enhancing defences against financial fraud in the process. There can be a positive outcome if we don’t make it, and if we look to the likes of Mauritius in dealing with the same grey reality.”

Last year, Nicolaas van Wyk, the CEO of SAIBA, welcomed the government's legislative drive to improve our anti-money laundering framework. “People who are setting up fake companies to help syphon money out of the country are a massive problem.”

It’s a pity that those legislative changes seem to have been too little too late.