South Africa's grey listing hits local firms but not our ambitions to grow business links

Monday 27 March 2023

Guernsey’s ambitions to attract business from South Africa are undimmed by the country’s international grey listing over anti-money laundering and combating financing of terrorism shortcomings.

The Guernsey Financial Services Commission has updated its requirements for companies with customers in the country after the Financial Action Task Force placed it on a list of jurisdictions under increased monitoring for weaknesses in its regime.

In essence it means increased bureaucratic hurdles, firms will need to review customers connected to South Africa and apply full customer due diligence where they may have previously used a concession.

It will also now be more onerous for people living there to open bank accounts or invest offshore.

The region has been a key focus of Guernsey Finance’s promotional activities, something that will continue. Next month the body is hosting a week-long private wealth roadshow there coinciding with the STEP South Africa Conference in Johannesburg, which it is a sponsor of.

Rupert Pleasant, Chief Executive of Guernsey Finance, said: “The recent grey listing of South Africa has been widely anticipated by the Guernsey regulator and every Guernsey financial services firm with customers in South Africa. 

“The grey listing means that firms will be required to analyse their client base and conduct enhanced client due diligence on certain South African related structures. This is standard practice in the circumstances and all firms have rigorous policies and procedures in place to meet their obligations - while at the same time ensuring that service levels remain high and underlying clients are inconvenienced as little as possible."

Pictured: Guernsey Finance Chief Executive Rupert Pleasant.

“The grey listing in no way changes Guernsey Finance's initiatives in South Africa, and the strength of the relationship and the business opportunities between Guernsey and South Africa remain as robust and important as ever to both jurisdictions.”

The Financial Action Task Force is an inter-governmental body whose purpose is to set international standards to combat money laundering, terrorist financing and proliferation financing.

It monitors countries to ensure they implement the FATF Standards fully and effectively.  

In 2021, it carried out an evaluation of South Africa which identified significant shortcomings in its framework for combatting money laundering and terrorist financing.

The FATF grey-listed South Africa at its plenary in early March, adding the country to its list of jurisdictions under increased monitoring. 

To reflect the steps taken by FATF, the Guernsey Financial Services Commission has added South Africa to Appendix I of the Handbook on Countering Financial Crime and Terrorist Financing which lists higher risk jurisdictions.

It also removed it from Appendix C which lists jurisdictions with equivalent AMLCFT regimes as Guernsey, for which certain customer due diligence concessions can be applied by licensees. 

“The implications of South Africa being removed from this equivalence list means that firms will need to review customers connected to South Africa and apply full customer due diligence where they may have previously used a concession,” the GFSC said. 

“We are asking firms to do this by way of an instruction and for them to complete this exercise by the end of this year. We spoke to industry associations about our plans in advance of our announcement and firms will have had experience of carrying out a similar exercise as this approach is in line with the measures the Commission applied when the Bahamas, Cayman Islands, Gibraltar and Malta were grey-listed. 

 “To be clear, our instruction does not stop firms doing business with South African clients but it requires them to do more due diligence than the minimum required historically.  This is to reflect FATF’s judgement on the increased South African risks and is similar to actions taken by other jurisdictions following FATF’s conclusion.

“As part of our ongoing supervision of firms, we will follow up in due course with firms with customers linked to South Africa, to check on what measures the firms took to comply with the instruction.”