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South African Regulator Steps Up Efforts to Exit Dirty Money Watchlist

South African Regulator Steps Up Efforts to Exit Dirty Money Watchlist
Johannesburg skyline.

South Africa’s financial watchdog is stepping up pressure on the legal fraternity and real estate brokers to comply with mandatory disclosure requirements, part of a bid to ensure the country is removed from a global watchdog’s dirty-money watchlist by the end of next year. 

The two industries have been identified as posing a high risk to the country’s efforts to fight flows of illicit funds and combat terror financing, and are being subjected to greater oversight from the Financial Intelligence Centre, which is central to South Africa’s plans to exit the Paris-based Financial Action Task Force’s so-called gray list.

“We must demonstrate to the FATF by May 2024 that this tool has credibility, has veracity,” Christopher Malan, the FIC’s executive manager for compliance and prevention, told reporters in an online briefing on Wednesday.

The FIC is mandated to assist in identifying the proceeds of crime, and combating money laundering, terrorism financing and the proliferation of weapons of mass destruction. Its briefing comes nearly a year after the FATF included South Africa on the gray list and gave the country until the end of January 2025 to address its oversight shortfalls.

Read More About South Africa’s Inclusion on the Gray List

So far, only 52% of the country’s 16,000 legal practitioner offices and 42% of the 9,000 estate agencies have complied with FIC’s requirements. Those that fail to do so will now be fined, and penalties could amount to millions of rand depending on the infraction, it said.

If the watchdog doesn’t take action in accordance with its powers, “it’s a another black mark,” Malan said. “We can’t afford to have such perceptions and black marks against our name”

South Africa has to take action in response to eight issues raised by the FIC by May and another eight by September, and that will be used as a basis for the watchdog to decide whether the country has earned the right to exit the gray list. An extended stay on the list poses a risk to investor sentiment toward South Africa and lead to capital and currency outflows.

“We’ve got six months left I think before we fall off the cliff, and it can be as drastic as that,” Malan said. “Our reputation would have evaporated,. It’s so hard then to deal with issues when you are viewed rather skeptically” by investors, he said.

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