The South African Reserve Bank (SARB) will be hoping that global money-laundering authorities, weighing up whether to keep South Africa on a terrorism financing greylist, will have seen the R15.9m blood nose it gave one of the country’s most venerable institutions, Old Mutual.
In February 2023, the Financial Action Task Force placed South Africa on its greylist for falling short of 22 criteria essential to combating financial crimes. While some have since been addressed, 14 issues remain.
Coming down hard on one of the country’s flag bearers – especially one with a 179-year history – is one way to show you’re serious.
Last week, the Prudential Authority, which falls under the SARB and regulates banks and insurers, imposed “administrative sanctions” on Old Mutual’s life insurance business, including that R15.9m fine.
But don’t be fooled into thinking Old Mutual is suddenly an open door for terrorists: first, this fine stemmed from an investigation done four years ago; and, second, there was no hint that any fraud had snuck through.
Instead, the infractions were far more mundane: the due diligence breaches included, for instance, not verifying the physical address of some clients, and not properly risk-rating its clients before signing them up. Others included not reporting suspicious transactions to the Financial Intelligence Centre (FIC) on time.
Sure, these are still breaches of the law, and South Africa can hardly afford to allow any financial institution to be anything less than impregnable to demonstrate why the country is no longer a money-laundering risk – but this wasn’t Steinhoff.

“There’s a sense that the authorities have upped the ante,” says Old Mutual CEO Iain Williamson. “Acknowledge, of course, that there were administrative gaps in our systems, but there was no real risk of us being a conduit for money-laundering at any point.”
Williamson tells Currency the company had been closing these gaps for some time, which led to R5.9m of its R15.9m fine being suspended for 36 months.
“Now that the country is trying to get off the greylist, there can be no tolerance for errors, even when you’re dealing with tens of thousands of transactions every month,” he says.
Williamson’s contention that the authorities have upped the ante is borne out by the rapid-fire series of fines it has issued in recent months. This year, it has issued seven such penalty notices, four to insurers and the rest to banks. The largest fine was R209.7m for banking group Sasfin, with R49m suspended.
Last year, about four such notices were issued. And SARB data shows at least eight penalties were issued in 2019, about three in 2020 and four in 2021. Like the Old Mutual case, many penalties addressed shortcomings from several years prior.
For years, “African corporates have been too lax in compliance”, says Asief Mohamed, chief investment officer at Aeon Investment Management.
Indeed, if a company like Old Mutual was found wanting, what does this say about less-established operators with far more porous processes?
“[If] Old Mutual has breached the regulations, what is happening at the smaller end of the industry,” asks Zwelakhe Mnguni, founder of Benguela Global Fund Managers.
Getting off the greylist
While the government has evidently been making efforts to demonstrate it has tightened up its anti-money-laundering rules, it’s not clear if this imperative has filtered down to the corporate level, he says.
“I haven’t seen enough action or reporting on targeted efforts at the corporate level to justify South Africa being removed from the greylist,” Mnguni says. “The SARB would probably need to step up their surveillance and inspection activities to make a convincing case for the country to be removed from the greylist.”
South Africa has to pass two inspections – one that just took place in September and another next February – to meet its goal of being removed from the greylist by next February.
Finance minister Enoch Godongwana, writing in the FIC’s annual report, released this week, said regulators and the private sector are “working together at an intense pace” so that South Africa can exit the greylist next year.
“To borrow from technology jargon, we could say that our country’s ‘anti-virus solutions’ were found to be outdated. It has become necessary to reboot, and download and install the latest security updates,” he said.
To many outside the financial sector, whether South Africa remains on the list might seem like a trivial issue, but Williamson says the implications are immense.
“[Being] on the greylist would make it harder to attract foreign investment, since those investors would want a premium to cover the extra risk,” he says. “It also means, for those institutions that borrow globally, that the cost of capital rises, so this makes everything more expensive. This comes at a genuine cost to the country.”
Top image: Collage. Image supplied/Currency.