South Africa Intensifies Efforts to Exit FATF Grey List by Deregistering Non-Compliant NPOs
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By Lerato Mpembe
In a move to address the Financial Action Task Force’s (FATF) concerns, the Department of Social Development has initiated a phased deregistration of non-compliant non-profit organisations (NPOs). This action aligns with South Africa’s commitment to rectify deficiencies identified by the FATF, which led to the country’s greylisting in February 2023.
Background on FATF Greylisting
The FATF, an international body overseeing global compliance with anti-money laundering (AML) and counter-terrorist financing (CTF) standards, placed South Africa on its grey list during its February 2023 plenary in Paris. This designation indicates that the country has strategic deficiencies in its AML/CTF regimes but is actively working to address them. To exit the grey list, South Africa must implement a 22-point Action Plan addressing eight strategic deficiencies in its AML/CTF framework. 
NPO Sector Under Scrutiny
One critical area identified by the FATF is the potential misuse of NPOs for terrorist financing and money laundering. The FATF recommended that South Africa develop a comprehensive risk assessment for the NPO sector to mitigate these risks. In response, the Department of Social Development, in collaboration with the South African Revenue Service (SARS) and the Financial Intelligence Centre (FIC), conducted an assessment titled “The Information on the South African Terrorist Financing Risk Assessment for the Non-Profit Organisations.” This assessment revealed a medium exposure to terrorist financing within the NPO sector.
Identified Risks
The risk assessment highlighted several threats that NPOs may face concerning terrorist financing, including:
• Raising funds or other support for foreign terrorist groups.
• Facilitating foreign travel for terrorist causes.
• Using the internet and online media for fundraising, recruitment, and propaganda.
Phased Deregistration Process
To mitigate these risks, the Department of Social Development has commenced a phased deregistration of non-compliant NPOs. As of October 2024, there were 295,052 registered NPOs, with 167,103 identified as non-compliant. The deregistration process involves:
1. Verification of Compliance Status: Identifying NPOs that have failed to submit annual reports as required by the Non-Profit Organisations Act, 71 of 1997.
2. Issuance of Compliance Notices: Notifying non-compliant NPOs and granting them 30 days to submit outstanding reports.
3. Deregistration: Removing NPOs from the register if they fail to comply within the stipulated period.
4. Appeal Process: Allowing deregistered NPOs to appeal the decision through an independent arbitration tribunal appointed by the Minister.
Implications for the NPO Sector
The deregistration initiative aims to ensure that NPOs maintain adequate standards of governance, transparency, and accountability. By enforcing compliance, the department seeks to protect the integrity of the NPO sector and prevent its exploitation for illicit activities. This action is also a critical step in addressing the FATF’s concerns and facilitating South Africa’s removal from the grey list.
Government’s Commitment
The South African government remains committed to collaborating with the private sector, labour, and civil society to tackle economic challenges. Deputy President Paul Mashatile, addressing the Knysna Regional 2024 Investment Conference, emphasized the importance of partnerships in promoting investment and economic development. He also provided updates on Operation Vulindlela, a joint initiative by the Presidency and National Treasury aimed at accelerating structural reforms and supporting economic recovery.
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