SA is well on track to address all the legislative deficiencies identified by the Financial Action Task Force (FATF) in its October 2021 report, which evaluated the country’s measures against money laundering and the financing of terrorism.
This is key if SA is to avoid a greylisting by the FATF, an international body that establishes standards for the combating of money laundering and the financing of terrorism, when it meets in February. Greylisting will have dire consequences for the economy and in particular the financial sector.
Last week the cabinet approved the General Laws (Anti-Money Laundering and Combating Terrorism Financing) Amendment Bill, which will tighten the law relating to the beneficial ownership of companies, trusts and non-profit organisations. The bill addresses 14 of the 20 deficiencies identified by the task force.
Two other deficiencies will be addressed by the Protection of Constitutional Democracy against Terrorist and Related Activities Amendment Bill — administered by police minister Bheki Cele — which is currently before parliament. Both bills are expected to be enacted by year’s end.
The remaining four technical deficiencies will be addressed through regulations, said the Treasury’s acting director-general, Ismail Momoniat.
Parliament’s finance committee is preparing proposed amendments to the schedules of the Financial Intelligence Centre Act to broaden the scope of accountable institutions to include credit providers, dealers in goods valued at more than R100,000 and dealers in cryptoassets, Krugerrands and motor vehicles.
Estate agents, gambling institutions, trust and company service providers, and legal practitioners would also be brought within the scope of the act, as well as providers of certain non-life insurance policies. These amendments also address FATF requirements.
Harder challenge
Momoniat said that when enacted into law the legislative amendments in the pipeline will improve SA’s adherence to international best practices in combating money laundering and the financing of terrorism. It will go a long way to warding off greylisting.
However, the legal framework is just one of the things that has to be addressed, he said, as SA is also assessed on how effective it is in implementing laws against money laundering and terrorism financing. These issues relate for instance to the country having a national risk assessment plan, how effective the authorities are in investigating and prosecuting the crimes, and whether there is asset forfeiture. Momoniat said this is where SA will face a harder challenge.
The General Laws (Anti-Money Laundering and Combating Terrorism Financing) Amendment Bill will be published immediately after it is tabled in parliament, which is expected to be in the next two weeks. The bill is an omnibus measure that amends the Financial Intelligence Centre Act, Non-Profit Organisation Act, Trust Property Control Act, Companies Act and the Financial Sector Regulation Act. A key focus is to improve information gathering to better establish beneficial ownership.
The task force identified as one of the priority actions that SA has to “establish better mechanisms to collect beneficial ownership information about companies and trusts”.
It noted that “insufficient beneficial ownership transparency is an acute vulnerability as companies and trusts are often misused for money laundering or to carry out predicate crimes, making attorneys and trust and company service providers inherently vulnerable to misuse”.
It said: “Law enforcement faces challenges to readily obtain accurate and updated beneficial ownership information about companies and trusts adequate to enable effective investigation of money-laundering and terrorism financing.”
Treasury worked closely with a number of departments and other organs of state in a dedicated committee on anti-money laundering and combating the financing of terrorism. SA authorities also obtained technical assistance from the World Bank and EU.
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