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Grey list survival guide: compliance strategies for South African companies

Written by Staff Writer

March 20, 2023

By Ola Oyetayo, Chief Executive Officer at Verto 

On the 24th of February 2023, South Africa was added to the FATF (Financial Action Task Force) grey list. This has important implications for businesses operating in or doing business with the country, as it can lead to increased scrutiny, regulatory barriers, and reputational risks. 

The FATF grey list is a list of countries that are considered to have strategic deficiencies in their anti-money laundering and counter-terrorist financing regimes but have committed to addressing these deficiencies. When the FATF conducts mutual evaluations of member countries, it identifies deficiencies in their systems and provides recommendations for improvement. If a country fails to take sufficient action to address these deficiencies, it may be added to the FATF blacklist, which can result in severe economic sanctions and other measures.

However, if a country is making progress in addressing the deficiencies, but has not yet fully implemented all of the necessary reforms, it may be placed on the grey list. Being on the grey list can have negative consequences for a country’s economy and international reputation, as it can signal to investors and other countries that the country’s financial system is not adequately addressing money laundering and terrorist financing risks.

Countries on the grey list have committed to implementing an action plan to address the identified deficiencies within a specified time frame and will be under increased scrutiny from FATF. Once the FATF determines that a country has made sufficient progress in implementing its action plan, it may be removed from the grey list.

The FATF’s decision to add South Africa to their watchlist is a warning to businesses operating in the country that they need to be extra vigilant when it comes to financial transactions. This means working with trusted partners who have a proven track record of implementing robust security and compliance measures.

Here are eight steps to guide South African companies in staying compliant in a time of increased scrutiny:

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1. Understand the Regulatory Landscape

Businesses should have a clear understanding of the regulatory landscape for cross-border FX and payment operations in the countries they operate in. This includes FATF guidelines and recommendations, as well as local regulations.

2. Implement robust KYC procedures

To mitigate the risk of financial crime, businesses should implement robust KYC (Know Your Customer) procedures, including verifying the identities of all parties involved in a transaction, keeping records of all parties verified, and conducting ongoing due diligence.

3. Conduct transaction monitoring

To detect and report suspicious activity, businesses should implement transaction monitoring systems that can flag any unusual or potentially fraudulent transactions.

4. Use Secure Payment Systems

Businesses should use secure payment systems to ensure that cross-border FX and payment operations are safe and comply with regulations. For example, Verto’s robust anti-money laundering and the combating the financing of terrorism controls help ensure that any business operating and trading with South African businesses are compliant with regulations and protected from the risks of financial crime.

5. Train employees

All employees should be trained on AML/CFT regulations, the company’s policies, and all procedures related to cross-border FX and payment operations. This will help to ensure that everyone is aware of their responsibilities and can identify potential risks.

6. Engage with regulators

Businesses should engage with regulators and other relevant authorities to stay up-to-date with any changes to regulations and guidelines related to cross-border FX and payment operations.

7. Conduct regular audits 

Regular audits can help businesses identify any compliance gaps and take corrective actions promptly.

8. Seek professional assistance

If businesses are unsure about their compliance status or need help implementing compliant cross-border FX and payment operations, they should seek professional assistance from experienced consultants or legal experts.

These recommendations will help South African businesses ensure they are making compliant cross-border FX and payment operations and avoid any potential penalties or reputational damage.

 

What is FATF?

FATF stands for the Financial Action Task Force, an intergovernmental organisation founded in 1989 by the G7 countries to combat money laundering and terrorist financing. Its primary goal is to set international standards and promote effective implementation of legal, regulatory, and operational measures to combat money laundering, terrorist financing, and other related threats to the integrity of the international financial system. The organisation currently has 39 member countries and jurisdictions, as well as a number of observer organisations.

About Verto

Verto is a global financial technology firm that enables businesses of all sizes to access enterprise-grade cross-border payments, FX and banking solutions via our advanced platform or API. Businesses can accept payments and send payouts globally in one single platform. Verto seamlessly connects any business, anywhere.

For more information visit www.vertofx.com

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