Legal Practitioners Under The Microscope: FIC Updates Sector Risk Ahead Of South Africa’s Next FATF Evaluation

The Financial Intelligence Centre (“FIC”) has circulated a further updated sector risk assessment for legal practitioners as part of South Africa’s preparations for its next mutual evaluation, which is expected to include an on-site visit in 2027 by an assessment team led by the Financial Action Task Force (“FATF”). That matters. Sector risk assessments feed into the national risk assessment process and show where regulators think anti-money laundering and counter-terrorist financing weaknesses persist.

For the legal profession, the draft report pulls no punches. The FIC still sees legal practitioners as highly vulnerable to money laundering and terrorist financing abuse, given the services they provide and the role they can play in structuring, transferring or safeguarding assets. The report names conveyancing, forming and managing legal entities, running client accounts, managing client affairs and other trust- or entity-related work as particular weak spots.

The report also shows the FIC taking a wider view than before. The original sector work covered only attorneys as accountable institutions under item 1 of Schedule 1 to the Financial Intelligence Centre Act, 2001 (“FICA”). The updated report reflects the current position, which includes attorneys and advocates with trust accounts following the December 2022 amendments. It also notes that the FIC, not the old law societies, now oversees AML and CFT supervision for legal practitioners as part of the broader shift for designated non-financial businesses and professions.

The sector is sizeable. According to the report, there were 21 294 legal practitioners registered with the FIC as at 22 May 2026, consisting of 20 611 attorneys and 683 advocates with trust accounts. The report notes that most registered legal practitioners are concentrated in Gauteng, the Western Cape and KwaZulu-Natal, which it describes as the country’s main geographic business hubs and the areas where supervisory action should be concentrated. On page 7, the report also records that the legal industry generated an estimated ZAR43 billion in private-sector legal services revenue in 2024, with the wider ecosystem exceeding ZAR67 billion annually.

What stands out is the report’s take on reporting behaviour and residual risk. Over the period reviewed, legal practitioners filed few regulatory reports, but those reports still covered large amounts. The report says legal practitioners filed reports on transactions worth more than ZAR4.3 billion and that cash is still widely used in the sector. The FIC says bluntly that this mix of low reporting and high transaction values is worrying and points to possible gaps in compliance awareness and risk recognition.

That worry runs through the report’s conclusions. The FIC rates the sector’s inherent money laundering risk as high and its inherent terrorist financing risk as low, though it will keep watching terrorist financing indicators. The report also questions whether it is realistic that so few firms rate themselves as medium, medium-high or high risk in the Risk and Compliance Return process, given how many practitioners do higher-risk work like conveyancing. The implication is pointed: some legal practitioners may not be sizing up their own risk seriously or accurately enough.

In practice, the draft assessment does not create new legal obligations. But it signals clearly what the FIC sees as ongoing trouble spots in the sector: cash use, funds moving through trust accounts, complex structures that hide beneficial ownership, property deals involving politically exposed persons or odd funding patterns, offshore or foreign-linked transactions, crypto assets, and middlemen in client onboarding. The report’s case studies (suspicious property purchases, cash-funded deals and unexplained third-party payments) drive home that these are real risks, not theoretical ones.

For legal practitioners, the timing matters. The next mutual evaluation will put South Africa’s risk understanding, supervisory effectiveness and sector-level implementation under fresh international scrutiny. So, this consultation is more than just a tick box exercise. It is an opportunity for the profession to assess whether the report accurately reflects how it operates and whether the final sector assessment will fairly and usefully shape both national policy and firm-level compliance.

The report is also a reminder that sector risk assessments should not be read in isolation. They should shape how legal practitioners think about their own risk management and compliance programmes, client onboarding, source-of-funds checks, trust account controls, reporting habits and internal training. If the FIC’s updated assessment holds up, many firms may need to ask whether their internal controls and risk ratings truly match the work they do.

Comments on the draft report are due by 14 July 2026. That gives legal practitioners and industry bodies a short but important window to respond to the FIC’s analysis and add sector experience that may improve the final report. We are assisting clients in reviewing the draft sector assessment, preparing submissions and assessing whether their internal AML and CFT controls accurately identify the risks highlighted by the report.

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