South Africa is making mixed progress in its efforts to curb trade-based financial crime.

The country has been removed from the targeted follow up process initiated by the Financial Action Task Force (FATF) eight years ago, but the scale of South Africa’s problems with illicit trade is huge and the authorities may lack the capacity to tackle it.

FATF decision

The FATF at its plenary meeting held in Buenos Aires, Argentina in November removed South Africa from its targeted follow up process.

Under this process, South Africa was required to report to every FATF plenary on the progress made in addressing deficiencies identified in the 2009 Mutual Evaluation Report in respect of customer due diligence and record keeping measures.


FATF removed South Africa from its watch list after several provisions of the country’s Financial Intelligence Centre Amendment Act came into operation in October 2017.

The task force also took into consideration substantial amendments to money laundering and terrorist financing regulations and the withdrawal of all exemptions under the Financial Intelligence Centre Act.

Lacking capacity

But trade-based financial crime is a big issue, even featuring earlier this month at the ANC’s 54th National Conference.

The CEO of Investec Bank, Richard Wainwright, told delegates that the South African Revenue Service (SARS) lacks the internal capacity to curb illicit financial flows, transfer pricing and trade misinvoicing.

“It’s fairly common knowledge that [SARS] institutional skill base needs to be rebuilt,” he said.

Illicit trade

The scale of the problem was underlined earlier this year when director of the Financial Intelligence Centre, Murray Michell, told parliament that about nine million suspected transactions were reported to the centre in the 2015-16 financial year.

According to Michell, about 2,490 products to the value of some US$4.6 billion were illicitly traded.