Government Cracks Down on NPOs Linked to Terrorism and Money Laundering

About 50 dubious non-profit organisations (NPOs) in South Africa are under government scrutiny for suspected terrorist funding and money laundering.

“These organisations are believed to be used by foreign terrorist-supporting groups to recruit individuals, undermining the sovereignty of the country,” said Peter Netshipale, the acting director-general of the Department of Social Development.

Government’s Crackdown on NPOs

The crackdown aligns with the Financial Action Task Force (FATF) Recommendation 8, which focuses on NPO oversight. As the registrar and regulator of the non-profit sector, the Department of Social Development is responsible for ensuring compliance and eliminating high-risk organisations.

“Recommendation 8 mandates our department to supervise the NPO sector, using a risk assessment framework. We work alongside law enforcement agencies such as the South African Police Service (SAPS), state intelligence, and the Special Investigating Unit (SIU),” Netshipale explained.

Additionally, he emphasized the department’s role in educating NPOs on legal compliance and monitoring financial transactions to prevent money laundering and terrorist financing.

NPOs as Vehicles for Money Laundering

A major concern is the use of NPOs to launder money.

“There have been cases where individuals deposit large sums—sometimes as much as R7 million—into an NPO’s bank account, only to withdraw it later without paying tax,” said Netshipale.

The Protection of Constitutional Democracy Against Terrorist and Related Activities Act outlines crimes related to acquiring, owning, trading, or utilizing funds intended to support terrorist activities. Terrorist financing involves the movement and storage of both legal and illicit funds to support individuals, organisations, or operations linked to terrorism.

South Africa Identified as a Medium-Risk Country

According to National Treasury’s deputy director-general, Ismail Momoniat, South Africa’s national risk assessment on terror financing identifies the country as medium-risk.

“While the phenomenon is not widespread in South Africa, we are required to implement mechanisms to assess risks across various sectors, including NPOs, and to conduct investigations where necessary. Law enforcement agencies must act on any breaches of the law,” Momoniat said.

Progress in Tackling Money Laundering and Terrorism Financing

Momoniat expressed optimism that South Africa would exit the FATF greylist by October.

“Our biggest issue is money laundering, driven by corruption and organised crime. Addressing serious and complex cases of money laundering remains a key FATF requirement,” he said.

The National Prosecuting Authority (NPA) and the Hawks (Directorate for Priority Crime Investigation) have been making strides in addressing financial crimes. “I hope outstanding cases will be resolved by June, allowing for an onsite FATF visit,” Momoniat concluded.

South Africa’s efforts to combat financial crime and ensure compliance with FATF recommendations remain critical in restoring global confidence and securing the integrity of its financial system.