Pretoria: With the deadline looming for South Africa to submit progress reports to the Financial Action Task Force (FATF) concerning its grey listing status, the Department of Social Development has announced the initiation of de-registration for non-compliant non-profit organisations (NPOs). This process will be carried out in phases, as revealed to Parliament’s Portfolio Committee on Social Development.
According to South African Government News Agency, South Africa was added to the FATF’s grey list during their February 2023 plenary meeting in Paris. The FATF, an international standard-setting body, oversees global compliance with anti-money laundering regulations. It developed an Action Plan consisting of 22 items linked to eight strategic deficiencies identified in South Africa’s anti-money laundering and combating financial terrorism framework. While progress has been made on five of these items, 17 remain outstanding, with a reporting deadline of 2026.
The Department of Social Development emphasized
that addressing all 22 action items is crucial for South Africa to exit the grey-listing status. One significant area of concern is the potential risk of NPOs being used for terror financing and money laundering. The FATF has recommended that South Africa develop a Terror Funding Risk Assessment specific to the NPO sector. This assessment identified a medium exposure risk within the NPO sector, noting threats such as fundraising for foreign terrorist groups, facilitating travel for terrorist causes, and using online platforms for recruitment and propaganda.
To mitigate these risks, the Department of Social Development, in collaboration with the South African Revenue Service (SARS) and the Financial Intelligence Centre (FIC), is developing monitoring mechanisms. A phased approach to de-register non-compliant NPOs that do not fall within the high-risk category has commenced, while closer supervision is being instituted for those identified as high-risk.
By October 2024, the department reported having 295,052
registered NPOs, with 167,103 identified as non-compliant. The Department of Social Development is tasked with promoting adequate standards of governance, transparency, and accountability among NPOs, as per the Non-profit Organisations Act, 71 of 1997, amended by the General Laws Amendment Act (GLAA). The FATF’s Mutual Evaluation Study highlighted the necessity to implement this law effectively.
The department has outlined a detailed process for de-registration, which involves verifying compliance status and issuing notices to non-compliant organisations. NPOs that fail to submit required reports within 30 days of receiving a notice may face de-registration. However, they are afforded the opportunity to appeal the decision, with the appeal process being managed by an independent arbitration tribunal.
The department underscored the importance of de-registering non-compliant NPOs to uphold the integrity and effectiveness of the nonprofit sector, ensuring that only compliant organisations continue to operate.
This process will be conducted over a period of six to 12 months, aligned with different financial years, to avoid causing alarm and allow NPOs time to comply with reporting requirements.
The Department of Social Development remains committed to supporting NPOs by fostering an environment that enables them to operate efficiently and effectively.