South Africa: political will needed to tackle corruption

South Africa has been removed from the Financial Action Task Force (FATF) ‘grey list’, following recent onsite reviews and progress on anti-money laundering reforms, but the problems faced by financial professionals confronting fraud and corruption are substantial and wide-ranging. William Saunderson-Meyer reports.

THE RECENT boardroom murder of Johannesburg insolvency lawyer Bouwer van Niekerk is a chilling reminder that South Africa’s anti-corruption professionals operate in harm’s way. At least six other financial investigators or forensic auditors have been assassinated in connection with their work in the past two years, causing Hendrik du Toit, the CEO of Ninety One, the country’s largest asset manager, to warn the authorities to rein in corruption and contract killings or risk capital flight as the rule of law wanes.

“Our law enforcement agencies are in a woeful state, but to date, our judicial system has held firm. For how long can it withstand the combination of lawlessness and the lack of urgency from the government to reform our law enforcement agencies?” he asked

Toit’s comments should be seen against the backdrop of the SA government’s Madlanga Commission, a judicial inquiry into criminality, political interference and corruption in the operations of the South African Police Service (plus municipal and specialist police forces), the National Prosecuting Authority (NPA) and the judiciary. Its early hearings have spotlighted claims of interference with police dockets and political meddling that stalled sensitive corruption and organised crime investigations, some of which include money-laundering charges.

Law enforcement reliability

But physical safety is only one part of the story. The larger detects, reports, investigates, prosecutes and confiscates the proceeds of complex financial crime, where there is room for slippage between theory and reality.

Regarding anti-money laundering (AML), on paper, reporting suspicious activities or transactions (SAR/STR) is straightforward. The Financial Intelligence Centre (FIC) Act obliges anyone “who carries on, is in charge of, manages or is employed by a business” to file such reports – typically within 15 working days – via the online portal of the FIC, which is SA’s financial intelligence unit.

Failure to file attracts heavy penalties, and alerting a client is a criminal offence. The regime spans cash threshold events, money-laundering risks, terrorist financing, targeted financial-sanctions breaches and cross-border funds transfers.

In practice, compliance is harder. ‘Suspicion’ is a deliberately low threshold, but professionals must weigh over-reporting and damaging client relationships and the criminal liability risk of under-reporting.

Thinly spread across a vast financial ecosystem, South Africa professionals must recognise what is ‘suspicious’ in a messy swirl of facts; proceed or pause without tipping off the client. They must capture the high-quality data that the FIC demands and accept the disheartening asymmetry that they will probably never learn the outcome of their report. For smaller firms outside the banking and financial services sector – law and accounting practices, estate agents, motor vehicle and luxury-goods dealers – these burdens often fall on lean teams or a sole proprietor.

Siviwe Dongwana, managing director of Johannesburg based restructuring specialists Adamantem, is confident that the human resources to keep SA off the grey list exist; it is more a matter of how they have been, and will be, deployed: “South Africa does not lack skills and expertise,” said Dongwana. Rather, part of the problem has been “an underperforming state” that has failed to draw “skilled and capable professionals into the civil service and other critical state institutions to counter corruption”. He explained: “Excellent professionals are pushed out of state institutions by corrupt politicians, political deployees, and pseudoentrepreneurs who are benefiting from state tenders.”

Albert van Zyl, manager of the Unit for Corruption and Integrity Studies at North-West University Business School, and is on the board of SA’s Institute of Commercial Forensic Practitioners, argued that the country’s financial institutions are “doing well” in adhering to the FATF regulations. SA’s commercial forensic profession has taken advantage of an opportunity to fill a vacuum: “It’s actually an example of society, the private sector, that stepped up.”

That said, so-called gatekeeper professions outside the banking sector, such as lawyers, accountants and precious metal and stone dealers, that may help move or hide dirty money – “there are some issues,” he admitted. These gatekeepers are now squarely on the hook, however. One new lever, introduced in 2023, is the Risk and Compliance Return (RCR) regime telling designated non-financial businesses and professions to assess their client-base’s AML and terror financing risk. Early returns hint at patchy adherence, according to experts, because of the onerous nature of these compliance regulations.

Overall RCR compliance is about 70 percent, with 76 percent for accountants, 66 percent for legal practitioners, 60 percent for high-value-goods dealers and 56 percent for real-estate agents, according to the FIC’s 2024/5 annual report.

Reporting volumes have surged as guidance and enforcement have sharpened. In 2024/25, the FIC received about 13.5 million regulatory reports, including 570,283 suspicious and unusual transaction/activity reports; banks filed 423,095 of those, and attorneys filed 2,859. The same year saw 50,644 cross-border funds-transfer reports and over 720,000 cash-threshold reports.

There is real movement, too, on investigations and prosecutions. Lesetja Kganyago, South African Reserve Bank governor, told the Financial Times that money laundering case outcomes had risen, with ‘verdicts’ in 98 matters in the year to March 2024, up from 65 three years earlier.

He did not specify how many of those verdicts were convictions and conceded that progress on complex commercial crime was disappointing, with convictions down about 10 percent to 333 over the same period.

Policing weaknesses

Whether the state has rebuilt the capacity to tackle sophisticated fraud and money-laundering remains contested. Critics note the absence of prosecutions against senior politicians implicated in the state-capture era under former President Jacob Zuma. Current President Cyril Ramaphosa has put the direct cost of state capture at more than South Africa Rand ZAR500 billion – while broader economic-loss estimates run closer to ZAR1.5 trillion.

“Unfortunately, this is where our problem lies,” said Van Zyl. “The police are really inundated with complaints. They don’t have the necessary staff. They’re not properly equipped. And even more so when it eventually goes to the prosecutors and the NPA.”

Forensic accounting capacity is still thin in both the Directorate for Priority Crime Investigation (DPCI) and the NPA. Complex matters take years and are vulnerable to delay tactics, amid globalised money flows, layered corporate vehicles and the added opacity of crypto, although crypto asset service providers have been under FIC supervision since 2022.

This ongoing capacity gap shifts a greater burden onto South Africa’s private sector practitioners to assemble case-ready, ‘oven-ready’ dossiers that prosecutors can run with.

Looking ahead, Van Zyl warns that the problem in South Africa is “the political will to really address corruption”, adding: “You can have the best system, but if the political will is not there, we’re not going to succeed. If the political will is not there, there’s not going to be the parliamentary oversight, and there are going to be bad appointments. And that is the core of our problem. That is what needs to change.”

Dongwana said getting off FATF’s grey list would provide “much-needed” confidence that the government took seriously the need to avoid being a destination of illicit funding and practices.

He shares, however, the widely held view that the country is not yet out of the woods. For that confidence to translate into foreign direct investment flows requires “more work on structural economic issues, political stability and a demonstrable will to deal with corruption”, he said: “The biggest risks are an under-performing state, endemic corruption, and paying [only] lip service to good governance,” he warned.