Greylisting could work for SA

It’s been almost a year since Mauritius was removed from the Financial Action Task Force (FATF) grey list – having only been on it for less than two years (February 2020 to October 2021).

As neighbouring South Africa seems to be heading in the same direction and may end up on the grey list itself, looking at how Mauritius managed its ‘grey time’ provides some good insight into what needs to be done to improve South Africa’s anti-money laundering and terrorist financing measures.

Listen/read: SA risks money laundering, terrorist financing grey-listing

Going grey was a good thing for Mauritius and could be for South Africa as well, enhancing defences against financial fraud in the process.

By no means is greylisting recommended, and the threat of such a status has seen the proposed Anti-Money Laundering and Combating Terrorism Financing Amendment Bill come into play as a step to avoid it.

But there can be a positive outcome if we don’t make it – and if we look to the likes of Mauritius in dealing with the same grey reality.

Mauritius was initially grey-listed for several reasons, including a lack of effective risk-based supervision, limited access to beneficial ownership information, and insufficient oversight on non-profit organisations that may be subject to terrorist financing. There was also a general ineffectiveness in conducting money laundering investigations.

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From State Capture to Steinhoff, South Africa is no stranger to such issues and has been under FATF observation since October 2021. It has until February next year to show improvements on financial crime prevention or the grey list is an inevitable consequence.

We might not be as lucky as Mauritius was to get off the grey list so quickly, as countries tend to spend several years on the list tackling legal amendments, but it is possible.

Mauritius now largely compliant

It has taken concerted effort to pull itself off this grey list exit, but Mauritius is now largely or fully compliant with 39 of the 40 FATF recommendations.

Mauritius has its FATF-approved objectives set out across core strategies such as strengthening its AML/CFT (anti-money laundering/counter financing terrorism) legal and regulatory framework to meet international standards, effective in mitigating risks. Implementing a comprehensive risk-based supervision framework is another strategy to monitor financial institutions and designated non-financial businesses, such as real estate brokers, banking and securities, and jewellery stores.

Mauritius has improved the process of detecting threats of fraud, prosecuting criminals, and confiscating illegal proceeds.

It has enhanced the transparency of legal persons and enlisted national co-ordination, as well as regional and international cooperation, which means authorities are working closely together to combat money laundering and financial crime. Increasing training, capacity and raising awareness have also been crucial steps to ensure all stakeholders are working in accordance with AML/CFT obligations.

Mauritius has implemented an AML/CFT data collection system as well, which aims to continuously improve on risk detection.

These are all very good steps that have gone a long way for Mauritius and South Africa would do well to take note.

James George is compliance manager at Compli-Serve SA.