By Lehlohonolo Lehana.
@ESO.
The European Union (EU) has removed South Africa, along with Burkina Faso, Mali, Mozambique, Nigeria and Tanzania, from its list of “High-Risk Third Country Jurisdictions”.
National Treasury welcomed the removal from the EU list, as well as the delisting of five other African countries.
South Africa was added to the EU List in August 2023 as an automatic consequence of its grey listing by the FATF in the same month.
This required EU financial institutions to conduct enhanced due diligence on SA-related transactions.
The removal from the EU list does not necessarily mean that SA transactions will be subject to less scrutiny, but it does allow EU institutions to adjust their risk assessment policies as they see fit.
Treasury has explained that EU law “requires that financial institutions in the EU must apply a higher level of scrutiny to transactions involving parties in countries deemed to be high-risk, resulting in more rigorous and intrusive checks, increased documentation requirements, continuous monitoring and senior management approval for transactions.
“These requirements add friction to financial transactions and flows, affecting trade, payments and investment”.
The EU issued a statement acknowledging the efforts of SA and five other African countries to strengthen their anti-money laundering and counter-terrorism financing (AML/CFT) regimes.
“Burkina Faso, Mali, Mozambique, Nigeria, South Africa and Tanzania have strengthened the effectiveness of their AML/CFT regimes and addressed technical deficiencies to meet the commitments in their action plans on the strategic deficiencies identified by the FATF.”
“The Commission therefore considers that Burkina Faso, Mali, Mozambique, Nigeria, South Africa and Tanzania no longer have strategic deficiencies in their AML/CFT regimes …”
SA was placed on the FATF grey list in 2023, primarily for weak investigation and prosecution of serious money-laundering activities, as well as inadequate supervision of non-financial business and professions such as lawyers, accountants and estate agents.
The FATF also raised concerns about SA’s ability to identify beneficial ownership in corporate structures, and weak international cooperation in facilitating money-laundering and terrorism-financing investigations.
These lapses have been considerably tightened since 2023.
However, Treasury notes that SA’s removal from the FATF and EU lists “does not mean that all South Africa’s challenges in implementing its AML/CFT system have been resolved, and recognises that much work still needs to be done to strengthen deficiencies in the prevention, identification, investigation and prosecution of money laundering and terrorism financing”.
South Africa will be entering a new round of evaluation by FATF in the coming months, with a final report due for presentation in October 2027.