Paul Hoffman: Suggestions to counter SA’s FATF greylisting

by | Mar 1, 2023 | Chapter 9, General | 0 comments

27th February 2023by Editor BizNews

By Paul Hoffman*

The Financial Action Task Force, FATF, which is mainly concerned with keeping a beady eye on the levels of money laundering, terrorism financing and serious corruption in the 200 countries and jurisdictions which it monitors, has, on 24 February 2023, placed South Africa and Nigeria on its “greylist” while at the same time removing Morocco and Cambodia from that list. There are currently 23 countries on the grey list. They are not the sort of countries with which any self-respecting constitutional democracy under the rule of law would aspire to be categorised.

Despite official efforts to downplay the effects of greylisting, the facts are that greylisting discourages foreign investment, and South Africa stands to suffer foreign direct investment shrinkage as a consequence. This shrinkage is inopportune at a time when it is common cause that increased investment is urgently required. Portfolio inflows also stand to decline. Other much needed general investment inflows are also likely to decline. Cautious investors of the kind who create jobs and stimulate economies are mindful that greylisting is but one step away from the ultimate pariah status of the black-listing to which North Korea, Iran and Myanmar are currently subjected. The 23 countries currently on the grey list include several African states with which SA ought not to be, and should not want to be, categorised. They are Burkina Faso, the DRC, Mali, Mozambique, Nigeria, Senegal, South Sudan, Tanzania and Uganda. Fealty to the rule of law is questionable in all of these jurisdictions, but in SA, the rule of law is regarded as supreme in section 1 of the Constitution.

Walking the walk of adherence to the rule of law is the first step on the road to the removal from the greylist. The FATF is open to persuasion: Mauritius was swiftly removed from the greylist when it urgently effected necessary reforms. Morocco and Cambodia have been able to persuade the FATF to take them off the grey list, while SA and Nigeria were added to it. There is good reason to believe that, correctly handled, the greylisting of SA could be of short duration. The shorter, the better from the point of view of alleviating poverty, stimulating job-creation and addressing the persistent inequality that is a blight on secure peace, sustainable progress and shared prosperity in SA.

Previous professions by government to a commitment to clean up corruption have clearly not impressed the FATF, nor do they impress opposition parties in SA which have a demonstrated commitment to the rule of law. The president must recognize that his “new dawn” requires a big injection of light in dark places in his administration. It is time for him to lead from the front. Here is a suggested “to do” list for him to consider, amend, expand and implement urgently. These suggestions aim to remove SA from the FATF’s grey list as soon as possible:

  • Dismiss cabinet members who do not subscribe to constitutionalism under the rule of law in their words and deeds. These include Lindiwe Sisulu, who has rubbished both the Constitution and the judiciary in her unrepentantly, unconstitutional utterances and Nkosazana Dlamini-Zuma, who has publicly espoused fanciful notions of “class suicide”
  • Dismiss cabinet members who have been named and shamed as implicated in malfeasance in the report of the State Capture Commission, they serve at your pleasure Mr President, and it can do your country and your party no good to populate your cabinet with those suspected of criminality
  • Subject all public servants and SOE employees also implicated by the Chief Justice to urgent disciplinary steps and suspension pending the outcome of those steps
  • Terminate cadre deployment in public administration and SOEs, except in circumstances contemplated by section 195(4) of the Constitution
  • Abandon the national democratic revolution in all of its aspects that are not consistent with the Constitution [] or, better still, follow the advice of Professor Kader Asmal and abandon it completely as an outmoded and unnecessary hindrance to progress in SA of the kind that is aimed at achieving the goals of the Constitution
  • Adopt a less ideological and more pragmatic approach to governance with adherence to integrity, merit and honesty in all appointments, policies and practices with strict adherence to the requirements of consistency with the Constitution as set out in Section 2 of the Constitution
  • Insist that all state employees and public representatives be integrity tested in the manner long required for the employees of the Special Investigating Unit, and that those who fail their tests be subjected to disciplinary procedures
  • Require public servants and SOE employees to sign a pledge of fealty to constitutional values along the lines suggested here
  • Take immediate steps to address the concerns of the FATF being:
  1. demonstrate a sustained increase in outbound Mutual Legal Assistance requests that help facilitate money laundering/terrorism financing (ML/TF) investigations and confiscations of different types of assets in line with its risk profile;
  2. improve risk-based supervision of Designated Non-Financial Businesses and Professions (DNFBPs) and demonstrating that all AML/CFT supervisors apply effective, proportionate, and effective sanctions for noncompliance;
  3. ensure that competent authorities have timely access to accurate and up-to-date Beneficial Ownership (BO) information on legal persons and arrangements and applying sanctions for breaches of violation by legal persons to BO obligations;
  4. demonstrate a sustained increase in law enforcement agencies’ requests for financial intelligence from the Financial Intelligence Centre for its ML/TF investigations;
  5. demonstrate a sustained increase in investigations and prosecutions of serious and complex money laundering and the full range of TF activities in line with its risk profile;
  6. enhance its identification, seizure and confiscation of proceeds and instrumentalities of a wider range of predicate crimes, in line with its risk profile;
  7. update its TF Risk Assessment to inform the implementation of a comprehensive national counter-financing of terrorism strategy; and
  8. ensure the effective implementation of targeted financial sanctions and demonstrating an effective mechanism to identify individuals and entities that meet the criteria for domestic designation.
  • Remove serious corruption, organised crime, kleptocracy and state capture related investigations from the mandate of the DPCI (Hawks)
  • Introduce, as a matter of urgency, reforms to the capacity of the criminal justice administration to deal with serious corruption cases by blending the resolution of the NEC of the ANC announced on 4 August 2020 with the more detailed suggestions of Accountability Now made in August 2021 and available here:
  • Implement the findings of the majority judgment (which is not the main judgment) in Glenister 2, when reforming the criminal justice administration to render it fully compliant with the criteria so set, which are binding on government as per Section 165(5) of the Constitution.
  • Educate the public on the need to be alert to the secretive and corrosive nature of corruption and its role in countering the corrupt
  • Cherish and protect whistleblowers

If these steps are taken urgently, an unanswerable case for removing SA from the FATF grey list can be made. Languishing on that list a minute longer than necessary is not in the interests of all South Africans, particularly those who live in poverty and make up 55% of the population.

*Paul Hoffman SC is a director of Accountability Now

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