South Africa’s biggest risk of being grey-listed again by the Financial Action Task Force (FATF) lies not in gaps in its laws but in proving that those laws work, says Chris Axelson (pictured), National Treasury’s deputy director‑general for tax and financial sector policy.
Axelson was speaking during a briefing on 10 June to the National Assembly’s Standing Committee on Finance (SCOF) on the General Laws (Anti‑Money Laundering and Combating Terrorism Financing) Amendment Bill.
Among other things, the Bill will tighten oversight of non‑profit organisations, strengthen beneficial‑ownership requirements, expand information‑sharing between institutions, and enhance the Financial Intelligence Centre’s tools to trace and analyse suspicious flows. This will involve amendments to four statutes: the Nonprofit Organisations Act, the Financial Intelligence Centre Act (FICA), the Companies Act, and the Financial Sector Regulation Act (FSRA).
Axelson said the country has entered an 18-month FATF mutual evaluation, with the first set of key reports due in July and October 2026. There will be an on-site visit in March 2027.
The new FATF methodology is more demanding than that used in the previous review. “The mutual evaluation is slightly different. It’s a new methodology, it’s wider, and it’s tougher than the old evaluation,” he told MPs.
The updated methodology gives greater weight to risk-based effectiveness, emerging risks such as crypto-assets, fraud and corruption, and the use of data, statistics, and case studies to show what is happening in practice rather than in theory.
Summing up the shift, Axelson said: “It’s about, well, yes, you’ve got the rules and regulations in place, but are you actually implementing them? Are they actually working or not?”
Treasury said South Africa’s technical compliance position is already relatively strong: the country is largely compliant with 38 of the FATF’s 40 recommendations, with two recommendations still only partially compliant – Recommendation 8, which deals with non-profit organisations, and Recommendation 32, which deals with cross-border cash couriers. Recommendation 32 is being handled through a recently gazetted framework, while Recommendation 8 requires legislative change.
The real test is compliance with the Immediate Outcomes
The real risk, Axelson said, lies in effectiveness. FATF will assess South Africa against 11 Immediate Outcomes, each rated low, moderate, substantial, or high, and the country must avoid being referred to the FATF’s International Co-operation Review Group, a step he described as difficult to reverse and a potential precursor to renewed greylisting.
Treasury is therefore focused on three updated national risk assessments – for money laundering, terrorist financing, and proliferation financing – together with better statistics, case studies and evidence of enforcement over the past five years.
On Immediate Outcome 1, dealing with risk, co-ordination, and policy, Axelson said South Africa needed updated national risk assessments on money laundering, terrorist financing, and proliferation financing. Treasury hoped to publish them in August.
On Immediate Outcomes 3 and 4, Axelson said the FATF would examine whether the right supervision was in place across the financial sector and other regulated sectors. He named the Prudential Authority, the Financial Surveillance Department at the South African Reserve Bank, the Financial Sector Conduct Authority, and the Financial Intelligence Centre, and said the review would look at whether they were effective in supervising institutions for money-laundering and terrorism-financing risk. He added that the process would, for the first time, include crypto-assets, which are now integrated into the supervisory framework under Immediate Outcome 3.
Axelson linked Immediate Outcome 5 to the accuracy of beneficial ownership information.
On Immediate Outcomes 6 to 8, Axelson said the FATF would look at whether financial intelligence was being used effectively, whether money-laundering investigations and prosecutions could be demonstrated, and whether authorities could show asset seizures and confiscations in money-laundering matters. These outcomes will be judged heavily on statistics, trends, and case studies over several years.
The last three outcomes – Immediate Outcomes 9, 10, and 11 – deal with terrorist financing, targeted financial sanctions, and proliferation financing. Axelson said the FATF would ask whether South Africa has the policy response and resources to deal with terror-financing risks, including in the NPO sector, and whether sanctions were being implemented effectively.
Key focus areas of the legislation
One focus of the Amendment Bill is FATF Recommendation 8 on non‑profit organisations, where South Africa was rated only partially compliant. The FATF had found that not all NPOs exposed to terrorist‑financing risk were covered by the NPO Act, that penalties were unclear, and that there was no enabling mechanism for action when suspicions arose.
Treasury said the FATF does not want blanket controls over the whole NPO sector; it expects focused, proportionate, and risk-based measures aimed at organisations that may be vulnerable to terrorist-financing abuse.
A second strand concerns beneficial ownership transparency, which is central to both the FATF’s technical standards and Immediate Outcome 5. Axelson said the Companies Act amendments are aimed at improving the accuracy of beneficial‑ownership information held by the Companies and Intellectual Property Commission (CIPC).
The Bill will require “obliged entities”, such as accountable institutions conducting customer due diligence, to report material discrepancies between their records and the beneficial‑ownership information on the CIPC register. It will also allow increase, from R1 million to R10 million, the maximum fine the CIPC can impose on companies that fail to submit or update their beneficial ownership information, or that provide false information, and to deregister a company that has failed to comply for two years or more.
The Bill also strengthens the FIC’s tools and information flows. Amendments to FICA expand the Centre’s access to registers held by organs of state, public entities, and municipalities, make explicit its authority to conduct lifestyle audits in defined circumstances, and lengthen the record‑keeping period for accountable institutions from five to seven years.
The legislation will broaden the list of bodies with which the FIC may share intelligence – including the Border Management Authority and a new Public Procurement Office – and refine South Africa’s targeted financial sanctions regime by allowing the FIC director to notify institutions of court‑ordered asset freezes and requiring them to screen clients and report attempted transactions by listed persons.
In addition, the Bill clarifies that banks and other accountable institutions may share information with one another on a confidential basis before filing regulatory reports, not only in relation to suspicious transaction reports but across all FIC reporting obligations. Axelson said this is intended to address the current difficulty in tracking illicit funds that are moved between institutions, by enabling co-ordinated analysis of customer activity across the sector.
The amendments to the FSRA are intended to keep supervision up to date with market innovation. They broaden the definition of financial products and instruments so that the Minister of Finance can designate new products or services more flexibly, allow for dual licensing where needed, extend information-gathering powers to significant and beneficial owners, and strengthen the South African Reserve Bank’s resolution powers to provide greater legal certainty in complex transactions.
Click here to download Treasury’s presentation on the amendments to the statutes, clause-by-clause.
Treasury urges swift passage of the Bill
Axelson highlighted the importance of the legislative timetable. He said the technical compliance assessment for the mutual evaluation would be “finalised in about November” and that if the General Laws Amendment Bill “went through before then, it would be able to assist in our ratings for the mutual evaluation”.
Because the FATF’s new methodology more closely links technical compliance and effectiveness, the government’s strategy is to have these amendments in force in time for them to count in the ratings that will ultimately feed into the October 2027 FATF plenary and the publication of South Africa’s mutual evaluation report in November 2027.
The concluding slide in National Treasury’s introductory presentation stated that the Amendment Bill “is urgently required” before the technical compliance process concludes in November/December 2026.
SCOF chairperson Joseph Maswanganyi (ANC) backed the need for urgency but emphasised that the process must remain constitutionally defensible and inclusive.
Maswanganyi said the committee would “move fast” in dealing with the new legislation. However, he warned that the SCOF could not act as if it had exclusive authority over the Bill, because it amends a range of statutes falling under several portfolios.
“We’re dealing with what we call transversal issues or transversal powers of various committees of Parliament, so in that regard, SCOF can’t take decisions alone,” he said. If it did so, he added, “the Bill that we are going to pass would be illegal. It will be challenged, and it will be declared null and void by the courts.”
Referring to Rule 169 of Parliament, which deals with conferring powers of committees, Maswanganyi said SCOF had formally to confer with other committees because the Bill touched the NPO Act, the Companies Act, and trust legislation. He identified, in particular, the portfolio committees on Social Development, Trade, Industry and Competition, and Justice.
“We’ll do things in a manner that is inclusive, procedurally defensible,” he said, adding that it would “not be proper” for SCOF to “promote itself and behave as if it’s a super committee of Parliament”.
He also indicated that key institutions and structures such as the South African Reserve Bank and the Presidential National Illicit Economy Disruption Programme should be brought into the process, given their roles in tackling illicit financial flows and informal or undocumented trading.
He noted that, in previous FATF-related legislative cycles, NPOs and churches had raised “very, very serious issues” with the committee, and signalled that their concerns would again have to be accommodated. While reiterating the pressure to act between July and November, he said Parliament had previously managed to process complex FATF-linked Bills “in a short space of time” without sacrificing procedural rigor and would aim to do so again.
