Greylisting can be avoided - Treasury HOD Momoniat

Wednesday, November 16, 2022

National Treasury Acting head of department, Ismail Momoniat, says he is optimistic that South Africa can avoid greylisting by the international Financial Action Task Force (FATF).

Momoniat was speaking during a Daily Maverick webinar on the potential greylisting on Wednesday afternoon.

The FATF works to combat money laundering and greylisting would not only impede the country’s ability to attract foreign investment but would also knock investor confidence in South Africa.

An evaluation report released by the organisation in October last year gave South Africa an adverse rating and laid out 40 recommendations and other measures which would allow the country to avoid greylisting.

“I am still optimistic that there is a path for us to prevent greylisting. It may not be likely but I think there certainly is a path. There’s legislation before Parliament and they are both at an advanced stage in the National Assembly.

“By February, we would have been able to show that [we are complying] largely with…20 of the 40 recommendations. The laws themselves deal with about 16 of the 20 and then they require some regulations and other measures but we’d get there on technical compliance,” he said.

The Treasury head warned, however, that although South Africa might reach the technical compliance threshold, “it is in effectiveness that we are lacking”.

“That is a general South African problem…it’s all about implementation and that’s where we lack. But even there, I am quite optimistic. There’s three or four of the immediate outcome measures that related to prosecutions, investigations [and] forfeitures.

“Compared to 2019, I would argue that our entities were at their weakest. They were coming out of State Capture, they just had a new head appointed [and] they hardly had any cases to show. Whereas now I think – slow as it has been – there has been a consistency and we are seeing the cases tally up.

“So we would be able to show that we’ve made fairly significant progress. Sure, we still need to make much, much more progress but if we can demonstrate that for each of the measures there’s commitment and we’ve made progress,” he said.

Missing the threshold

Momoniat said that in the event of greylisting, government’s work towards meeting the FATF’s recommendations and measures will soften the blow.

“To the extent that we get greylisted but we’ve demonstrated that we’ve changed the laws, we’ve demonstrated that we’ve made progress on five or six of the measures, it’s a very different message that will come through that South Africa has made progress, it just needs a bit more time and the impact will be less.

“Certainly, I’m hoping on the financial sector side, correspondent banks and so on, we’ll have passed the test,” he said.

The treasury head expressed that the effect of the FATF’s evaluation has sharpened focus at all levels to ensure that South Africa avoids greylisting.

“In a sense, the effect of [potential] greylisting has concentrated minds and got to make sure that our criminal justice system actually begins to work better when you deal with financial crimes.

“We’ve made them aware of the economic consequences of them acting too slowly. They’ve realised that their own performance is in a sense, under observation and have certainly begun to get their house in order. Certainly that awareness has got through to them.

“Even with the other authorities that we deal with on terror financing…they’re beginning to do things now that they weren’t doing before and that there’s a great focus on this. There are going to be tough challenges all the time but I think we can show that we’ve made significant progress,” he said. –