STEVEN POWELL | What the General Laws Amendment Bill means for SA

South Africa’s removal from the Financial Action Task Force (FATF) greylist in October last year marked a significant milestone in the country’s ongoing efforts to combat money laundering and terrorist financing. However, our work is far from complete. The FATF made clear that South Africa must continue strengthening its ability to proactively identify and investigate money laundering.

The draft General Laws (Anti-Money Laundering & Combating Terrorism Financing) Amendment Bill, now undergoing public consultation, is a direct and necessary response to these criticisms. At the heart of this proposed legislation is an expansion of powers for the Financial Intelligence Centre (FIC), particularly regarding the ability to conduct lifestyle audits.

This development has understandably generated public interest and, in some quarters, concern. As a forensic practitioner, I believe it is important to explain what these changes mean in practice, why they are necessary and what safeguards exist to prevent abuse.

Understanding the proposed powers

The General Laws Amendment Bill gives the state the ability to proactively investigate suspicions of money laundering. One of the key criticisms levelled by the FATF was that South Africa was not doing enough to proactively identify and investigate money laundering. This legislation is essentially designed to cure that criticism.

Under the proposed amendments the FIC would be empowered to conduct lifestyle audits at the request of government entities, including municipalities and government departments. When requested, the FIC would provide information to the relevant investigating authority to assist in pursuing potential investigations where an individual’s lifestyle appears inconsistent with their declared income.

Currently, the FIC can conduct a lifestyle audit only when following up on a suspicious trail of money flows. If there is suspicious activity, and as part of its analysis the FIC is following the money, it may include a lifestyle audit as part of that investigation. That information would then be made available for further investigation to the relevant authorities.

What the FIC cannot presently do is conduct a lifestyle audit in circumstances where there is no earlier suspicion, for instance, where a government entity wishes to conduct background checks on prospective employees. The proposed amendments would allow the FIC to conduct lifestyle audits in such instances as well, thereby providing government bodies with a valuable tool for ensuring integrity within the public service.

What is a lifestyle audit?

A lifestyle audit assesses whether a person’s standard of living matches their declared lawful income. The bill formally defines it as determining whether living standards are consistent with income from legitimate sources. We have all seen examples of public displays of wealth—perhaps an influencer showcasing a Lamborghini on Instagram—that do not align with reported earnings. These are precisely the kinds of discrepancies that lifestyle audits are designed to identify.

Sars has been using lifestyle audits for quite some time. What the bill does is extend this capability more broadly across government.

It is crucial to understand that a lifestyle audit is a red-flag investigation, not a prosecution. It is an investigative tool used when there are indicators of unexplained wealth or a suspicious lifestyle. A lifestyle audit does not amount to evidence before a court of law. It simply signifies that someone is potentially living beyond their means and that further investigation is warranted.

Nobody is going to be prosecuted, whether in a disciplinary process or in a criminal court, unless the state has the ability to prove whatever concerns emanate from the lifestyle audit. If you have been driving a Ferrari for the last few years and your declared income to the South African Revenue Service (Sars) is less than R500,000 per annum, these are the types of circumstances that should give you cause for concern. The proposed legislation gives the state the power to take such matters further.

This is not an entirely novel approach. Sars has been using lifestyle audits for quite some time. What the bill does is extend this capability more broadly across government.

Safeguards against abuse

Any expansion of state powers naturally raises concerns about potential abuse. These concerns are legitimate and must be addressed. The proposed legislation includes several important safeguards:

First, the FIC would need to be satisfied that any entity requesting a lifestyle audit has a legitimate interest in doing so. A prior relationship would need to be demonstrated before the FIC would proceed with carrying out the audit. If the request is not in the context of the FIC following up on something suspicious, the FIC would apply its judgement on a case-by-case basis to ensure that the requesting entity has a genuine and lawful reason for the request.

Second, privacy protections remain in place. The FIC would seek confirmation that the subject of the lifestyle audit is aware that the audit is being conducted and that the information being used was obtained from that person. These are privacy issues that must be respected, and the requirements of the Protection of Personal Information Act continue to apply.

It is worth noting that the FIC would not directly inform the person that a lifestyle audit is being conducted. That responsibility would rest with the entity that requested the audit. The requesting entity would need to have obtained the individual’s cooperation or consent before the process commences.

The crypto challenge

A legitimate question arises: will these expanded powers simply drive criminals to move their money out of the formal banking system and into cryptocurrency or other alternative platforms?

This concern is well-founded. In our forensic work we already see criminals making extensive use of crypto and other platforms to create complexity and evade scrutiny. The ability to move money across borders with ease and limited control has made cryptocurrency an attractive vehicle for drug cartels and other criminal enterprises.

However, this is not a uniquely South African problem, and it was one of the areas where the FATF expressed concern globally. In response, we have seen extensive regulation and supervision of cryptocurrency over the last number of years. Some of the mainstream traditional financial institutions are now starting to embrace crypto as a mechanism for payment, precisely because doing so allows for better monitoring and control.

Regulators across the board are clamping down on the abuse of cryptocurrency. Criminals will inevitably seek out these alternative platforms, but the authorities are aware of this and are taking steps to monitor and address the money laundering risks that crypto presents.

Addressing broader vulnerabilities

The General Laws Amendment Bill addresses more than just lifestyle audits. A suite of changes has been introduced to tackle the vulnerabilities that the FATF identified in South Africa’s anti-money laundering framework.

Nonprofit organisations have historically been abused to hide illicit financial flows. We have seen evidence that terrorist organisations and cartels were using NPOs with limited supervision and limited disclosure of beneficial ownership to launder funds. The bill gives the NPO directorate stronger monitoring and enforcement powers to close this loophole.

Beneficial ownership transparency is also being tightened. This addresses another past FATF criticism: that individuals were able to hide assets behind opaque corporate structures. The amendments require greater transparency regarding who ultimately owns and controls legal entities, making it harder for criminals to conceal their interests.

Why this matters now

South Africa will undergo another FATF assessment in 2026-2027. These reforms are critical to ensuring that the country does not regress towards greylisting. We have made promises to the FATF regarding the proactive identification of fraud, corruption and money laundering, and we must demonstrate that we are implementing those commitments.

We cannot rest on our laurels. The passage of this bill, and its effective implementation, will allow South Africa to demonstrate to the FATF that we are serious about combating financial crime. The proactive identification of money laundering was one of the promises we made, and this legislation is a crucial step towards fulfilling that undertaking.

The General Laws Amendment Bill represents a measured and necessary expansion of the state’s ability to combat money laundering and related financial crimes. The powers being granted to the FIC are not arbitrary. They are subject to important safeguards and oversight mechanisms. For those who are living honestly and within their means, there is nothing to fear. For those who are not, the message is clear: the net is tightening.

As professionals working in the forensic and legal space, we welcome these developments. Effective anti-money laundering measures protect the integrity of our financial system, support legitimate businesses and uphold the rule of law. The amendments proposed in this bill bring South Africa into closer alignment with international standards and strengthen our collective ability to identify and address financial crime.

• Powell is head of department: forensics at ENS.