To strengthen efforts to exit the FATF grey list, South Africa’s Department of Social Development has started deregistering non-compliant non-profit organizations (NPOs). This step is part of the country's commitment to addressing issues raised by the Financial Action Task Force (FATF).

NPO Sector Faces Increased Scrutiny

A key area flagged by the FATF involves the risk of NPOs being used for terrorist financing and money laundering. The FATF recommended a thorough risk assessment of the NPO sector to mitigate these threats. In response, the Department of Social Development collaborated with SARS and the Financial Intelligence Centre (FIC) on an assessment titled “The Information on the South African Terrorist Financing Risk Assessment for Non-Profit Organizations.” This assessment identified a medium level of exposure to terrorist financing within the sector.

Identified Risks

The risk assessment outlined several potential threats for NPOs, including:

Raising funds or support for foreign terrorist organizations.
Facilitating travel for individuals involved in terrorist activities.
Using online platforms for fundraising, recruitment, and propaganda.

Phased Deregistration Process

To address these risks, a phased deregistration of non-compliant NPOs is now underway. As of October 2024, South Africa had 295,052 registered NPOs, with 167,103 classified as non-compliant. The deregistration process includes:

Compliance Verification: Identifying NPOs that have not submitted mandatory annual reports as per the Non-Profit Organizations Act (Act 71 of 1997).
Compliance Notices: Issuing notices to non-compliant NPOs, granting them 30 days to submit their outstanding reports.
Deregistration: Removing NPOs from the register if they fail to meet compliance requirements within the specified period.
Appeal Process: Providing an avenue for deregistered NPOs to appeal through an independent arbitration tribunal appointed by the Minister.

Impact on the NPO Sector

This initiative aims to uphold high standards of governance, transparency, and accountability within the NPO sector. By ensuring compliance, the Department of Social Development seeks to safeguard the sector from misuse and protect its integrity. This proactive approach also addresses the FATF’s concerns, contributing significantly to South Africa’s goal of being removed from the grey list.

South Africa’s Push to Exit FATF Grey List: NPO Deregistration Underway