By Lee-Yandra Paulsen
Non-compliance by legal and property practitioners is jeopardizing South Africa’s bid to be removed from the greylist next year. This issue not only affects the country’s financial reputation but also facilitates transnational organized crime and terrorism financing.
Senior Coordinator from the Institute for Security Studies, Willem Els, discussed the implications and potential solutions for this critical issue on VOC Breakfast on Thursday. Els explained the dynamics around greylisting: “South Africa was greylisted in 2023 after being put on notice in 2022 following a national risk assessment. This assessment rated the risk in South Africa for money laundering and terrorist funding as moderate. Recently, the 2024 assessment downgraded this rating to high. Despite South Africa strengthening our legislation and financial intelligence centre, we did not make the cut. This negatively impacts our economy as borrowing money becomes more expensive and moving money becomes more difficult.”
He emphasized that being branded as prone to money laundering and terror funding is detrimental, citing international instruments by the UN Security Council. Els elaborated on how citizens are impacted: “South Africa has a huge debt, making it more difficult and expensive for us to borrow money. This trickles down into our main industries, increasing banking costs and other financial burdens. Currently, five countries in SADC, including South Africa, are greylisted.”
Els highlighted the prevalent compliance issues among legal and property practitioners: “The function of the Financial Intelligence Centre (FIC) is to monitor financial transactions in South Africa. All these institutions and service providers are legally obliged to report suspicious transactions to the FIC. The FIC then investigates and hands over cases to the police for potential prosecution. We see that especially in Directive 6, where they were instructed to report by 21 May 2023. Legal practitioners, trust companies, estate agents, and gaming institutions were required to comply, but only legal practitioners and estate agents had less than 50% compliance.”
The reason for this compliance is crucial: “Criminal syndicates commonly launder money through property transactions, which legal practitioners and estate agents need to flag. This is how the government can monitor money laundering to align with international laws,” stated Els.
VOC News
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