SA stands out in fight against financial crime
March 23, 2009
By Murray Mitchell
South Africa is in a very fortunate position at this time of the worst global financial crisis in recent history. Our banks have not seen the same sort of liquidity crunch experienced by those in countries such as the US and the UK, let alone Iceland.
Yet although international credit rating agencies are not racing to upgrade local banks, they will find solace in yet another thumbs-up to South Africa from an international body.
In a report released last week by the Financial Action Task Force, the Paris-based body commended South Africa for "its strong commitment" and its "good progress in developing its anti-money laundering system".
The report confirms the high supervisory standards of the local financial sector and shows confidence that our banks and other financial institutions offer limited scope for money laundering or terrorism funding activities.
The report is the result of a recent assessment by a team of experts of South Africa's system to combat money laundering and terror financing.
The task force found key local law enforcement authorities, such as the SA Police Service, Sars, the Asset Forfeiture Unit and the Financial Intelligence Centre were co-operating efficiently in the fight against financial crimes.
Little is known about the task force in South Africa. This important intergovernmental body, representing 34 of the world's leading industrialised and developing countries, develops and promotes policies and standards to combat money laundering and terrorist financing.
It was created in 1989 to help bring about legislative and regulatory reforms in areas concerning the combating of financial crimes. South Africa became a member in 2003.
Such is its success and stature that several members of the Group of 20 finance ministers and central bank governors, meeting this weekend to discuss the global financial crisis, have suggested that the approach adopted by the task force in dealing with money laundering should be used more broadly to track tax evasion and other violations of financial regulations.
The task force regularly assesses, through a peer review process, its members and their legal systems, preventive measure on financial and non-financial businesses and professions, their enforcement mechanisms and the effectiveness of a country's implementation thereof.
It uses a comprehensive and detailed methodology to conduct the assessments. The resulting report and ratings are shared with the IMF, World Bank and other international institutions and then used, for example, by credit ratings agencies in their risk rating of countries.
South Africa scored highly on most of the measured areas, despite it having only been a member of the organisation for about five years. Comparatively speaking, South Africa has in some areas performed better than many of the developed countries that are part of the task force.
The report suggests that while the laws and system are now in place, the South African authorities should demonstrate their effectiveness by securing an increased number of successful prosecutions for money laundering.
Murray Michell is the director of the Financial Intelligence Centre.
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