As South Africa intensifies efforts to exit the Financial Action Task Force (FATF) grey list by year-end, Deputy Minister of Social Development, Ganief Hendricks, has called on non-profit organisations (NPOs) and the civil society sector to work with government in achieving this goal.
The Deputy Minister made this remark at the start of the three-day multi-stakeholder engagement convened by the Department of Social Development at Premier Hotel OR Tambo, in Kempton Park on Monday.
The engagement is focusing on Recommendation 8 of the Financial Action Task Force, which aims to protect NPOs from potential terrorist financing and money laundering abuse through effective implementation of risk-based measures.
READ | Social Development hosts engagement session on the FATF’s Recommendation 8
The FATF is the international standard-setting body that oversees global compliance with anti-money laundering rules.
In his address, Hendricks cautioned government against using legislation to stifle the operations of legitimate NPOs that play a vital role in communities across South Africa.
“Our National Development Plan (NDP, Vision 2030) calls for active citizenry especially from the grassroots level. We must therefore guard overburdening and frustrating grassroots initiatives through the use of legislation.
“The objective of the NPO Act is to create an enabling legislative environment for the NPO sector to thrive and contribute to our national development agenda”, the Deputy Minister said.
The Deputy Minister’s sentiments were echoed by representatives from Kagiso Trust, Afrika Tikkun, Thuthuka Foundation, The Grail Centre Trust and Chartered Institute for Business Accountants (CIBA), all of which expressed concerns about “over-regulating the NPO sector”.
Speaking on behalf of the National Treasury, which is the lead government department in addressing all of the FATF’s recommendations, Ismail Momoniat mentioned that while South Africa has made great progress towards exiting the grey list, much more still need to be done with regard to full satisfying FATF’s global anti-money laundering and counter-terrorist financing standards.
“[The] FATF is not satisfied with the mere existence of national legislation, but also enforcement of administrative penalties for high-risk NPOs that fail to comply with the provisions of the law. We need to look beyond FATF’s standards and collectively work towards ensuring a national blueprint on transparency and accountability”, Momoniat said.
The latest report from FATF shows that South Africa has partly met the criteria for Recommendation 8.
One of the FATF’s requirements is that Social Development, as the regulator of the NPO sector in terms of the NPO Act (Act No. 71 of 1997, as amended through the General Laws Amendment Act 22 of 2022), has to conduct more outreach and educational programmes with NPOs to promote better understanding of the global anti-money laundering and counter-terrorist financing standards.
Survey
To assess the risks of terror financing in the sector, South Africa conducted a national survey with a sample of 301 registered associations, non-profit companies and public benefit organisations from databases of the Department of Social Development, Companies and Intellectual Property Commission (CIPC) and South African Revenue Service (SARS).
The survey found that NPOs in South Africa were exposed to medium risks from the operations of known terror organisations such as the Islamic State and its affiliates in Africa, al-Shabab and its affiliates in East Africa Boko Haram, amongst others.
Of the 301 NPOs surveyed, 120 were identified as high-risk. The survey found that the nature of risks associated with NPOs in South Africa include but not limited to, NPOs facilitating foreign travel for terrorist causes, using multiple bank accounts, being used as conduit to channel foreign funds to terrorist groups in Africa, supporting terrorist causes through cash and using the internet and online media for fundraising recruitment and propaganda.
The Acting Director of the Financial Intelligence Centre, Advocate Peter Smit emphasised that since FATF Recommendation 8 does not apply to all NPOs, it is important for South Africa to show that the majority of NPOs are not high-risk and therefore should not be subjected to restrictive legislative and administrative requirements.
FATF is scheduled to conduct an onsite visit on Recommendation 8 in South Africa in September this year as part of the periodic reporting requirement to exit the grey list.
The FATF grey listed South Africa at its February 2023 plenary meeting held in Paris. It developed an Action Plan with 22 Action items linked to the eight strategic deficiencies identified in the country’s anti-money laundering and combating of financial terrorism regime.
The second day of the multi-stakeholder engagement will focus on national and international perspectives and the impact of Recommendation 8 on NPOs, as well as sharing of best practice from Uganda, which has successfully been removed from FATF grey list. – SAnews.gov.za
