South Africa’s Anti-Money Laundering Bill: Can It Meet FATF Standards Without Burdening Legitimate NPOs?

• The General Laws (Anti-Money Laundering and Combating Terrorism Financing) Amendment Bill (B15-2026) seeks to prevent South Africa from being placed back on the FATF grey list in 2027, following its removal in October 2025.
• The Bill introduces new compliance notices and administrative sanctions specifically for non-profit organizations (NPOs) legally mandated to register, primarily those involved in cross-border activities.
• These legislative changes aim to address deficiencies under FATF Recommendation 8, which requires countries to implement "focused, proportionate and risk-based" measures for NPOs.
• A key concern persists regarding whether the Bill's application to NPOs "required to register" adequately aligns with South Africa's 2024 NPO sector risk assessment.
• Legal advisors must monitor the Bill's final version to guide NPOs on new obligations and ensure compliance with genuinely risk-based regulatory requirements.

The critical remaining concern is whether the criterion of being “required to register” sufficiently aligns with the specific, risk-assessed subset of NPOs that Recommendation 8 stipulates should be subject to supervision.

South Africa is currently advancing the General Laws (Anti-Money Laundering and Combating Terrorism Financing) Amendment Bill (B15-2026) through Parliament. This legislative initiative is primarily designed to ensure the nation avoids being placed back on the Financial Action Task Force (FATF) grey list when the next international assessment concludes in October 2027, following its removal from the list in October 2025.

The FATF operates as an intergovernmental body responsible for establishing global standards aimed at combating money laundering, terrorist financing, and the financing of weapons of mass destruction. While its initial mandate focused on money laundering, its scope expanded to include terrorist financing following the tragic events of September 11, 2001. Inclusion on the FATF grey list signifies that a country possesses strategic deficiencies in its anti-money laundering, terrorist financing, and proliferation financing controls, leading to heightened international scrutiny and increased costs for financial transactions.

Historically, the FATF has viewed non-profit organizations (NPOs) as potential conduits for terrorist financing. This perception stems from several factors: charities often raise funds from the public, enjoy a high degree of trust, frequently operate in conflict-affected regions, and transfer funds across international borders with less oversight compared to traditional banks or corporations. There have been documented instances where charitable organizations were either established as fronts for illicit activities or had their funds illicitly diverted to armed groups.

However, the FATF's approach has undergone significant evolution. After initially treating the entire NPO sector with suspicion, the body revised its standards in 2016 and again in November 2023. These revisions were prompted by an internal review that revealed legitimate NPOs were experiencing adverse consequences, including funding losses and denial of banking services. The updated FATF standard now mandates that countries must identify NPOs that genuinely pose a risk and implement measures that are “focused, proportionate and risk-based,” without unduly disrupting or discouraging legitimate charitable work.

The Department of Social Development (DSD) has publicly stated that the amendments to the NPO Act are intended to rectify existing deficiencies under Recommendation 8, which is the FATF standard specifically addressing non-profit organizations. The DSD's objective is to elevate South Africa's compliance status from “partially compliant” to “compliant.” There is a broad consensus within the NPO sector that a return to the grey list would be detrimental, as charities and their beneficiaries are often the first to feel the negative repercussions, such as bank account closures and donor withdrawals. Crucially, FATF assessors do not merely confirm the existence of a law; they scrutinize whether it effectively targets the appropriate organizations in a suitable manner, recognizing that an overly broad or “blunt” law can be as ineffective as no law at all.

Under the existing NPO Act, there are two primary categories of registered NPOs. Since 2022, organizations that engage in cross-border donations or provide services internationally are legally mandated to register. All other NPOs, such as crèches, soup kitchens, sports clubs, and church groups, register voluntarily, typically because a funder or government department requires a registration number for engagement. The majority of organizations currently on the NPO register fall into this voluntary registration category.

An earlier draft of the General Laws Amendment Bill, published by Treasury in January 2026, initially proposed extending new monitoring and enforcement powers to both categories of NPOs. However, following extensive submissions and feedback from the sector, the version of the Bill tabled in Parliament in May 2026 introduced a significant correction. The new compliance notices and administrative sanctions will now apply exclusively to organizations that are “required to register.” This adjustment was widely regarded as an early victory for the NPO sector.

Despite this positive change, a critical concern remains: whether the criterion of being “required to register” sufficiently aligns with the specific, risk-assessed subset of NPOs that Recommendation 8 stipulates should be subject to supervision. While a cross-border test can serve as a proxy for risk, it does not constitute a definitive finding of actual risk. South Africa has already undertaken the more challenging task of completing its 2024 NPO sector risk assessment, which precisely identifies where the risks lie. However, the current Bill does not explicitly link the registration duty or the new enforcement powers to the findings of this comprehensive assessment. For FATF assessors, demonstrating that supervision is genuinely risk-based requires a clear connection between the law and the identified risks. Furthermore, the Bill leaves the NPO Act’s existing enforcement rule unchanged, which allows any registered organization receiving a compliance notice one month to comply, with the possibility of an extension granted by the director for good cause.

For legal professionals advising non-profit organizations in South Africa, it is imperative to closely monitor the final version of the General Laws Amendment Bill (B15-2026). Understanding the new compliance obligations and potential administrative sanctions, particularly for NPOs categorized as 'required to register,' will be crucial for providing accurate guidance. Lawyers must also critically assess whether these provisions genuinely embody a risk-based approach, as stipulated by FATF Recommendation 8.

This ongoing scrutiny is vital because FATF assessors evaluate not only the presence of a law but also its effectiveness in targeting the appropriate organizations in a proportionate manner. A legislative framework that fails to demonstrate this precise link between identified risks and applied supervision measures could still fall short of international standards, despite the country's efforts to enhance its anti-money laundering and combating terrorism financing regime.

Lawyers advising NPOs in South Africa must monitor the final version of the General Laws Amendment Bill to understand new compliance obligations and potential administrative sanctions, particularly for NPOs 'required to register,' and assess if these provisions are genuinely risk-based as per FATF Recommendation 8.

Source: Original reporting via Daily Maverick