The ability to investigate and prosecute organised crime could come under scrutiny if weaknesses in law enforcement persist, warns National Treasury.
National Treasury technical advisor Ismail Momoniat says while the upcoming FATF evaluation poses a challenge, it’s also an opportunity for SA to fix its systems and ensure the country does better against financial crime. Picture: Gallo Images/ Foto24/Denvor de Wee
Damning allegations surfacing at the Madlanga Commission of Inquiry could cast a shadow over South Africa’s next anti-money laundering assessment by the Financial Action Task Force (FATF).
National Treasury technical advisor and former acting director-general Ismail Momoniat warned members of parliament’s Standing Committee on Finance on Tuesday that the country’s ability to investigate organised crime, successfully prosecute and recover criminal assets could come under the spotlight if weaknesses in law enforcement persist.
High-ranking officials appearing before the Madlanga Commission in recent months have testified about sophisticated organised crime networks that allegedly infiltrated law enforcement, intelligence structures and metro police to obstruct justice and facilitate drug syndicates.
“Clearly, I think the events at the Madlanga Commission and the ability of the country to deal with organised crime – particularly if many of our top police are implicated in their links to organised crime – impacts on South Africa,” Momoniat said.
South Africa exited the FATF grey list in October 2025, but the next assessment has already begun.
Immediate outcomes
Chris Axelson, deputy director-general of tax and financial sector policy at National Treasury, told MPs that the country’s 18-month mutual evaluation process is underway and will be broader and tougher than the previous review.
Great emphasis will be on proving that anti-money laundering measures work in practice rather than simply complying with international standards.
The effectiveness component of the evaluation is assessed through 11 so-called “Immediate Outcomes”, which measure whether authorities are achieving tangible results with financial intelligence, investigations, prosecutions, convictions and the recovery of criminal assets.
Momoniat said some of the toughest measures South Africa will face in the upcoming FATF mutual evaluation relate directly to the country’s ability to investigate and prosecute financial crime.
“They are Immediate Outcome 7, which is about investigations, prosecutions and convictions with regard to money laundering, and there’s one for terror financing as well.
“Immediate Outcome 9 and 8, which are related to asset seizures and recoveries – these are the hardest measures SA will have to deal with.”
From compliance to action
The upcoming mutual evaluation runs until late 2027.
Treasury said South Africa currently largely complies with 38 of the 40 FATF recommendations, including one that is not applicable, while two recommendations remain partially compliant.
As a result, there is a relatively low risk of South Africa being greylisted because of shortcomings in legislation.
The bigger concern is whether the country can demonstrate that its anti-money laundering framework is working in practice.
The effectiveness assessment examines whether authorities can identify and understand risks, supervise institutions appropriately, investigate and prosecute serious money laundering cases, confiscate criminal proceeds and implement targeted financial sanctions.
Law enforcement institutions
It will also test whether agencies cooperate effectively and whether law enforcement institutions have the capacity to deal with increasingly sophisticated financial crimes.
“It is not a secret that the area of law enforcement is one of our biggest challenges, particularly as they relate to financial crime,” Momoniat said.
“So, the coming evaluation does pose a challenge, but also an opportunity for us to do better, fix up our system and make sure we do better against financial crime.”
Treasury said assessors will place significant emphasis on five years of statistics showing improving trends, supported by practical case studies.
Special attention will be paid to investigations, prosecutions and convictions, especially over the most recent two years.
The first key reports in the mutual evaluation process are due in July and October this year, followed by an onsite visit by FATF assessors from 2 to 19 March 2027.
Treasury urged parliament to process the General Laws (Anti-Money Laundering and Combating Terrorism Financing) Amendment Bill as quickly as possible.
Legislative amendments
The bill proposes amendments to four acts aimed at strengthening South Africa’s anti-money laundering and counter-terrorism financing framework.
The proposed changes include:
- Nonprofit Organisations Act: Strengthens the Department of Social Development’s powers to monitor compliance and impose administrative sanctions. Treasury stressed that the approach here is to target organisations vulnerable to terrorist-financing abuse rather than impose broad restrictions across the sector.
- Financial Intelligence Centre (FIC) Act: Expands the FIC’s ability to share information, including between financial institutions, to better track suspicious transactions across banks. It also allows the FIC to conduct lifestyle audits for certain public-sector appointees at the request of other agencies, broadens access to government databases and registers, and extends record-keeping requirements from five to seven years.
- Companies Act: Improves the accuracy of beneficial ownership information – identifying the real people who ultimately own or control companies. Financial institutions would be required to report discrepancies to the Companies and Intellectual Property Commission, while companies that fail to update ownership information could face administrative penalties.
- Financial Sector Regulation Act: Updates the regulatory framework to keep pace with innovation, allows dual licensing where necessary and permits regulators to investigate suspected contraventions even when those responsible have not yet been identified.
Momoniat said the General Laws Amendment Bill should ideally have been enacted before the end of July.
“But even if it’s in place by September or October, it will help – not just on technical compliance, but also to help South Africa with its effectiveness measures,” he said.
This article was republished from Moneyweb. Read the original here.
