Durban - South Africa is perceived globally as an easy target for financial crimes including money laundering due to the country having porous financial impropriety protection systems.
This saw the Financial Action Task Force (FAFT) placing SA under increased monitoring or greylisting on Friday.
The greylisting means the cost for South Africa's entities to transact with the rest of the world will be higher – where funds flowing out of the country will be viewed with more suspicion.
The FATF is an inter-governmental organisation that underpins the fight against money laundering and terrorism financing by setting global standards and checking if countries respect them.
Dr Sanele Gumede, a lecturer in economics at the University of KwaZuluNatal, said this meant South Africa’s financial systems were not safe for investors. They would not understand what ploughing their monies into the country meant.
“There are loopholes in our systems. There are ways in which people can launder money and this is mainly looking into the illegal exchange of money as opposed to countries that are not grey listed,” Gumede said. “In terms of our regulations and monitoring our policies, we have let down our guard a lot.
We have become complacent, meaning that we have become unsafe in terms of money and the stability of ensuring that everything is monitored accordingly.” Gumede said a prime example was the Phala Phala scandal, which although it was still under investigation, showed there were loopholes in our systems.
It raised questions, such as the presence of large sums of money in US dollars stashed under a mattress. “That is in the president's space and obviously there are others and, remember, we are still in for the Zondo commission and their findings there. In the global outlook South Africa looks like an easy target for financial crimes.”
A Treasury official speaking anonymously said: “Among the indicators assessed by the FATF was the efficacy of a country’s criminal justice system and the global body has been impatient with our criminal justice system.”
On Wednesday, during the Budget speech, Finance Minister Enoch Godongwana acknowledged “the need to be more effective in implementing our laws, particularly in fighting organised and sophisticated crimes”.
For its part, the Treasury has been pumping money into law enforcement agencies to address the complaints of lack of capacity and critical skills. Godongwana set aside R1.3 billion for the NPA, meant “to support the implementation of the recommendations of the state capture commission and the FATF”.
The NPA has come under criticism for being big on public relations stunts related to politically charged cases – including being weaponised to serve the interests of the powerful political elite – but thin on convictions. Said another government source: “In the FATF’s view, following the long-standing state capture commission of inquiry, people should be in jail by now.”
National Treasury spokesperson Cleopatra Mosana said the Cabinet had considered an action plan and committed to actively work with the FATF and the Eastern and Southern Africa Anti-Money Laundering Group to swiftly and effectively address all outstanding deficiencies and strengthen the effectiveness of its Anti-Money Laundering and Combating the Financing of Terrorism regime.
“Since the publication of its Mutual Evaluation Report in October 2021, the South African government has already demonstrated its commitment to implementing the recommended actions, including the speedy enactment of two major pieces of legislation (which in turn amended six acts of Parliament), the General Laws (Anti-Money Laundering and the Combating the Financing of Terrorism) Amendment Act and the Protection of Constitutional Democracy Against Terrorism and Related Activities Amendment Act, in order to address some of the technical deficiencies identified in the Mutual Evaluation Report,” Mosana said.
SUNDAY TRIBUNE