An Assessment of South Africa’s Vulnerability to Terrorism Financing and the Counter-Terrorist Financing Framework

Abstract

Terrorism financing poses a direct threat to South Africa’s national security as well as the integrity and reputation of its financial system. Terrorism financing has the potential to finance and enable terrorist activities locally and abroad. Over and above posing a security threat, it also impacts the integrity of non-financial institutions such as charities and non-profit organizations which could be exploited, often unwittingly, for the financing of terrorism. Terrorist groups make use of multiple methods to raise move, store and/or use funds and exploit the inherent vulnerabilities of countries’ regulatory, financial, law enforcement and security frameworks. Their techniques vary and depend on the sophistication and objectives of terrorists, terrorist organizations and their sympathizers. Terrorism financing investigations are usually extremely complex, particularly with regard to the identification of financiers and ultimate end-users of the generated funds. This is due to the myriad financial transaction mediums such as cash and crypto assets, the international nature of transfers between financial jurisdictions, the informal financial sector (e.g. Hawala), as well as the capacity and capability challenges faced by financial institutions, regulators, supervisory bodies and law enforcement agencies. Funds intended for terrorism related activities may be derived from legitimate as well as from illicit sources, making terrorism financing particularly difficult to detect, disrupt and prevent. The constant evolution of terrorism financing methods in response to new and increasingly sophisticated countermeasures remains a continual challenge locally and for international financial oversight bodies such as the Financial Action Task Force (FATF) and its regional-style bodies. This paper will investigate and assess South Africa’s vulnerability to terrorism financing and the counter-terrorist financing framework to effectively combat terrorism financing. The key issues to be appraised include an assessment of factors that contribute to SA’s vulnerability to terrorism financing. A counter-terrorist financing framework adopted by SA.