Parliament has applied the brakes on the National Treasury’s drive to push through urgent legislative measures necessary to avoid SA being greylisted by an international body that sets standards for the combating of money laundering and financing of terrorism.
The measures are intended to strengthen SA’s legal framework to combat money laundering and terrorism financing and bring it in line with the standards set by the Financial Action Task Force (FATF), which identified weaknesses in SA’s regime in a 2021 evaluation report.
“Given the greylisting we face, the sooner we do things the better for us,” Treasury acting director-general Ismail Momoniat said on Wednesday evening at a meeting of parliament’s two finance committees briefed on the proposed amendments to the schedules to the Financial Intelligence Centre (FIC) Act.
He was speaking from Berlin where he was attending an FATF meeting. He said SA’s system to prevent money laundering was “well behind” international standards in the scope of business activities covered by the act.
But, the Treasury’s proposed amendments have to be approved by parliament, and parliament’s two finance committees have decided that they cannot be rushed and that there will have to be a public participation process.
“We have to do things properly as a legislative body. That is a constitutional imperative,” standing committee of finance chair Joe Maswanganyi said.
The National Assembly is in recess from Monday until mid-August and the National Council of Provinces from June 27 until August 1. That limits the time available to adopt the proposed amendments in time for the FATF process.
FIC executive manager for legal and policy Pieter Smit noted that SA needed to report back to the FATF in October, demonstrating the improvements that have been made. The FATF will meet in February next year to decide whether it is satisfied with the actions taken. If not, it could greylist the country, indicating it does not meet the standards.
Momoniat said the Treasury conducted an extensive consultation process from March 2017 until 2019 and gazetted the proposed amendments for comment in June 2020. They were tabled in parliament last month.
Smit said a greylisting by the FATF would carry huge reputational risk for SA and have severe consequences for international trade and investment links, which could be cut off. The cost of business would rise and entry into new markets would become more difficult.
SA banks would be at risk of losing critical banking relationships with overseas banks. Governments, financial institutions and businesses in many countries are reluctant to do business with countries considered to have weak regimes to combat money laundering and terrorism financing. SA financial institutions may also face heavy fines by overseas regulators. The high international regard for SA’s financial regulation, which has for many years been a buffer against further credit ratings downgrades, would be affected.
This is why the Treasury wants to have urgent changes made to the schedules to include more accountable institutions such as dealers in motor vehicles, Krugerrands and precious stones; crypto asset service providers; high-value goods dealers receiving payments of R100,000 or more; money or value transfer providers; and service providers that conduct transactions on behalf of their clients, such as accountants. Credit providers other than banks would be included.
Accountable institutions have to report suspicious transactions to the FIC and are required to identify and verify clients and perform other customer due diligence requirements in terms of the FIC Act.
SA is running out of time to avoid financial greylisting ensorl@businesslive.co.za
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