FATF

We all know that there are too many organisations out there to count, all with different functions. The main purpose of most of them is to help and regulate the processes around us and make our lives more secure and easy. In this article, we at iCE3 are going to share information about the FATF (Financial Action Task Force) and their “visit” to South Africa.

Who or What is the FATF?

FATFTheir main job is to combat money laundering and the financing of terrorism. Also, FATF is an inter-governmental policy-making body whose main aim and purpose is to establish serious international standards and to develop and promote policies. Both at international and national levels. As you can now understand, one of the main items on the agenda for them in South Africa is that we are one of the biggest bitcoin and cryptocurrency holding countries worldwide.

The FATF identifies jurisdictions with weak measures to combat terrorist financing and money laundering (AML/CFT) in two FATF public documents which they issue three times a year.

What is the Financial Action Task Force GREY list?

OECD blacklist or the FATF blacklist has been issued by the Financial Action Task Force since 2000. It lists countries which it judges to be non-cooperative in the global fight against terrorist financing and money laundering calling them “Non-Cooperative Countries or Territories” (NCCTs).
The short answer is 38. There are currently 38 members of the FATF; 36 jurisdictions and 2 regional organisations (the Gulf Cooperation Council and the European Commission). These 37 Members are at the core of global efforts to combat terrorist financing and money laundering.

Why was FATF created?

Let’s mention the reason behind of creation of FATF. The objectives of the FATF are to set standards and promote effective implementation of:
– legal
– regulatory
– operational measures
for combating:
– money laundering
– terrorist financing
– other related threats to the integrity of the international financial system

The History Behind FATF

history of FATFThe Financial Action Task Force (FATF) was established in July 1989 by a Group of Seven (G-7) Summit in Paris. Initially to examine and develop measures to combat money laundering.

In October 2001, the FATF expanded its mandate to incorporate efforts to combat terrorist financing. That was in addition to money laundering.  In April 2012, it added efforts to counter the financing of proliferation of weapons of mass destruction.

Since its inception, the FATF has operated under a fixed life-span, requiring a specific decision by its Ministers to continue.  Three decades after its creation, in April 2019,  the FATF Ministers adopted a new, open-ended mandate for the FATF.

The objectives of the FATF are to set certain standards and promote effective implementation of regulatory, legal, and operational measures for combating terrorist financing, money laundering and other related threats to the integrity of the international financial system. Starting with its own members, the FATF monitors countries’
– progress in implementing the FATF Recommendations;
– reviews money laundering and terrorist financing techniques and counter-measures;
– promotes the adoption and implementation of the FATF Recommendations globally;

Here is the document of 30 years of FATF life-span.

Assessment visit to Japan and South Africa later this year

The Financial Action Task Force (FATF) and the Eastern and Southern Africa Anti-Money Laundering Group (ESAAMLG) have jointly assessed the implementation of anti-money laundering and combating the financing of terrorism (AML/CFT) standards in South Africa.
South Africa has been part of FATF since 2003. The main 4th Round Mutual Evaluation of South Africa, joint FATF/ESAAMLG  will happen on two tentative dates:
– First date: On-site visit: October / November 2019
– Second date: Plenary discussion: June 2020
There are a few good claims regarding South Africa, which we as Citizens can be very proud of:
  •  South Africa has made good progress in developing its system for the financing of terrorism (FT) and combating money laundering (ML) since its last FATF mutual evaluation in 2003.
  • The money laundering offence is generally in line with the Vienna and Palermo Conventions, although a lack of comprehensive statistics makes it difficult to assess effectiveness.  Provisions criminalising the financing of terrorism are comprehensive, although they are not yet tested in practice.
  • The Financial Intelligence Centre (“the Centre”) is an effective financial intelligence unit.
  • The confiscation scheme is comprehensive and utilises effective civil forfeiture measures.  Since 2003, South Africa has also adopted mechanisms to freeze terrorist-related assets.

Crypto Assets?

South Africa has been at the forefront of exploring cryptocurrencies and via the IFWG (intergovernmental fintech working group) we have a robust approach to regulation, allowing a business to operate with oversight but not stifling the industry. Depending on whether the latest FATF recommendations are ratified, we may just pass with flying colours! – Gareth Grobler, CEO iCE3X

And more from the protocol…

  • The FIC Act imposes customer due diligence, suspicious transaction reporting and internal control requirements and record keeping.  It should be noted that, after the FIC Act came into force, South Africa implemented a program to re-identify all existing customers.  However, the issue of beneficial ownership has not yet been addressed and South Africa also needs to adopt measures dealing with correspondent banking and politically exposed persons (PEPs).
  • The FIC Act covers some designated non-financial businesses and professions (DNFBPs); however, South Africa needs to broaden the legislation to cover dealers in company service providers, precious metals and stones, and more broadly cover accountants.
  • At the time of the on-site visit, there were not adequate powers to enforce and supervise compliance with AML/CFT provisions, however, amendments to FIC Act have been enacted, and when they enter into force this year they will significantly enhance the compliance regime.
  • South African authorities have established effective mechanisms to co-operate on operational matters to combat FT and ML.  South Africa can also provide a wide range of mutual legal assistance, including the possibility to extradite its own nationals.

Conclusion

South Africa goes in the right direction. People will feel safer and terrorist financing and money laundering will be lowered drastically in the future. What are your thoughts regarding FATF  stepping more serious in South Africa?
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