Inclusion of South Africa on AML blacklist requires ESMA to withdraw the recognition decision of JSE Clear

Summary:

On [Date: 16 July 2023], the European Commission added South Africa to the list of high-risk third countries presenting strategic deficiencies in their national anti-money laundering and counter-financing of terrorism (AML/CFT) regime. As a result, the European Securities and Markets Authority (ESMA), the EU’s financial markets regulator and supervisor, was required to withdraw the recognition decision of JSE Clear, a central counterparty (CCP) established in South Africa.

The recognition decision was withdrawn in accordance with Article 25(2) of the European Market Infrastructure Regulation (EMIR), which states that ESMA must withdraw the recognition decision of a third-country CCP (TC-CCP) if any of the cumulative conditions set out in the article is no longer met. In this case, the condition that the TC-CCP is established or authorized in a third country that is not included in the AML blacklist under the AML Directive is no longer fulfilled.

To minimize potential market disruption, ESMA has provided an adaptation period of three months. The withdrawal of the recognition decision will enter into effect on 29 December 2023, which means that the CCP concerned will no longer be permitted to provide clearing services to clearing members or trading venues established in the EU.

Additionally, ESMA has updated its list of recognized third-country central counterparties (TC CCPs). This move aims to ensure that EU financial markets operate in a safe and stable environment, and that the EU’s financial systems are protected from potential risks associated with third-country CCPs.

Background:

In order for a TC-CCP to be recognized by ESMA, all cumulative conditions set out under Article 25(2) of EMIR must be met. These conditions include, but are not limited to, the requirement that the TC-CCP is established or authorized in a third country that is not included in the AML blacklist under the AML Directive.

In the case of JSE Clear, the recognition condition mentioned above is no longer fulfilled, as South Africa is now considered a high-risk third country. As a result, ESMA was obligated to withdraw the recognition decision, which will have implications for the CCP’s operations and its ability to provide clearing services to EU-based clearing members and trading venues.

For further information, please contact Sarah Edwards, Senior Communications Officer at ESMA: press@esma.europa.eu.