Failure to comply with regulations in the legal and property sectors is undermining efforts to remove the country from the grey list next year, according to the Financial Intelligence Centre (FIC). Despite being identified as the most vulnerable to money laundering and terrorist financing abuse, these sectors continue to ignore FIC directives aimed at helping South Africa exit the grey list of the Financial Action Task Force (FATF).
Last March, the FIC issued two directives aimed at legal practitioners, estate agents, and dealers in precious stones, among others. These directives require businesses and professionals to respond to a series of questions and submit them to the FIC by May 31, 2023. However, the current submission rate is only 60% for legal professionals and 66% for estate agents.
“The sectors of concern to us are the legal practitioners and estate agents because they are regarded as higher risk in our anti-money laundering regime. They act as gatekeepers, overseeing clients and entities in our financial system. Our focus is on them based on our assessment of South Africa, which categorizes our legal and property practitioners as high risk,” stated FIC’s Compliance and Prevention Executive Manager Christopher Malan. FIC expressed concern about the level of non-compliance, especially in the legal profession.
“We have received reports from some of our state partners and agencies that in their interactions with lawyers, there is a perception that we will only address this issue if we are caught or if we are found to have not submitted the required information. It’s concerning that despite being at MIT, there still seems to be a belief among practitioners that this is not a serious matter. It’s important for them as good corporate citizens and practicing professionals to adhere to and comply with the laws of South Africa. This attitude is very worrying,” Malan stated.
The FIC says institutions still have not submitted their risk assessments are considered delinquent and high-risk. It says these institutions will potentially face targeted inspections or sanctions for non-compliance.
South Africa was grey-listed by the Financial Action Task Force (FATF) in 2023 due to its lack of compliance with international standards related to money laundering and addressing illicit financial flows. The country is currently working on addressing its areas of non-compliance and hopes to exit the grey list by February next year.
