Legal and Property Sectors Slammed for Delaying South Africa’s Exit from Grey List

South Africa’s hopes of exiting the global Financial Action Task Force (FATF) grey list are being threatened by persistent non-compliance within the legal and real estate sectors, according to the Financial Intelligence Centre (FIC).

The FIC has flagged legal practitioners and estate agents as high-risk sectors for money laundering and terrorism financing due to their low levels of regulatory compliance, specifically regarding the submission of Risk and Compliance Returns (RCRs).

Despite over a year of warnings, the submission rate of RCRs remains at an unsatisfactory 70%, with legal professionals submitting 11,351 returns and estate agents just 6,506. The national compliance level hovered at 60% in May 2024, raising serious concerns at a time when the rest of the DNFBP (Designated Non-Financial Businesses and Professions) sector has made progress.

“South Africa has not yet met the FATF requirement fully,” the FIC said in a recent statement. “This is largely due to poor RCR submissions by legal practitioners and estate agent businesses.”

Why It Matters

When the FATF placed South Africa on its grey list in 2023, it cited significant concerns around money laundering, terrorist financing, and the tracking of illicit financial flows. While the country has made strides in addressing these issues, the lack of compliance from specific DNFBPs has emerged as a bottleneck.

RCRs are a critical tool for the FIC to understand sector-specific risks. Without accurate and timely reporting, authorities are unable to effectively supervise high-risk entities or implement risk-based guidance.

The FIC has also warned that wilful non-compliance may result in targeted inspections, sanctions, and being labeled as delinquent institutions—a label that increases reputational and operational risks for businesses.

Who’s Affected

DNFBPs include:

• Legal practitioners

• Real estate agents

• Trust and company service providers (such as accountants)

• Dealers in precious metals and stones (including Krugerrands)

• High-value goods dealers

However, legal and property sectors are currently the primary focus, given the low compliance rates and their significant role in financial transactions.

What’s Next

The FIC is urging all DNFBPs to urgently file outstanding RCRs before the end of Q2 2025 (April–June) to improve risk classification and support South Africa’s removal from the grey list.

“The starting point unquestionably is the timeous completion and submission of RCRs,” the FIC emphasized.

Until full compliance is achieved, South Africa’s reputation in global financial markets remains at risk, potentially affecting investment, banking relationships, and the broader economy.

If you operate in the legal or real estate sector, now is the time to act. Regulatory authorities have made it clear that ongoing delays will no longer be tolerated—and the cost of inaction could be high, not just for your business, but for the country at large.

{Source: BusinessTech}

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