Vulnerabilities in the South African non-profit sector to economic crimes : money laundering and terrorist financing

Abstract

The South African non-profit sector plays a crucial role in developing and maintaining the social welfare of those in impoverished communities. This is done by adding value to services rendered by the government or rendering services where government support is non-existent. Economic crime in this sector, specifically money laundering and terrorist financing, has been prevalent due to the vulnerabilities that accompany the sector. After the results of the 2021 South African FATF Mutual Evaluation were released to the public, it was clear that South Africa’s non-profit sector lacks the protection it needs. This adds to the likelihood of South Africa being placed on FATF’s grey list, which will have dire consequences for the economy. This study’s main objective was to perform an analysis of the South African non-profit sector, to determine the vulnerabilities present. A specific focus was placed on money laundering and terrorist financing. To meet the main objective, the following was critically analysed: • The South African non-profit sector. This was done to gain a better understanding of how the sector is set up, how it functions, who regulates it, what vulnerabilities can be identified in it, as well as how to mitigate these vulnerabilities. • The 2021 South African FATF Mutual Evaluation Report. This provided an in-depth view of the areas in which the South African non-profit sector is lacking regarding the protection thereof against money laundering, terrorism and terrorist financing. The concerns were highlighted and discussed, along with possible measures to address these concerns. In summary, this study concluded that there are many vulnerabilities in the South African non-profit sector that render it susceptible to economic crime, specifically money laundering and terrorist financing. It was determined that the risk of grey-listing by FATF is still an immediate threat, but that it can be mitigated by following the appropriate guidelines and advice suggested by the author. There is a need for more research in the non-profit sector, with a larger focus being placed on the protection thereof against abuse. The research should be appropriate and inclusive, giving NPOs and the relevant stakeholders an opportunity to provide their input. This is the only way the South African non-profit sector will be able to effectively and proportionately address the risk of abuse that it faces.