written by Amanda Crouch with the assistance of ChatGPT
On 19 December 2022 the General Laws (Anti-Money Laundering and Combating Terrorism Financing Act, 2022 (“The Amendment Act”) came into effect.
The Amendment Act signifies a noteworthy stride in remedying shortcomings in South Africa’s anti-money laundering and counter-terrorist financing regime, which were identified by the Financial Action Task Force (“the FATF”) in its 2021 Mutual Evaluation Report. The recommendations made by the FATF in its report were not fully complied with, which led to our grey list designation.
While the grey list status of the country does not impose any legal limitations on conducting business with South Africa, its entities, or individuals, it signifies that the nation as a whole has been identified as having significant shortcomings in its regulations and policies pertaining to money laundering, terrorist financing, and proliferation financing. These deficiencies fall below the standards widely recognised by the majority of the western world.
An overall failure to exhibit effectiveness and implementation in practice has led to Accountable Institutions (“AI’s”) having to comply with more stringent customer due diligence, reporting and compliance with the Financial Intelligence Centre Act (“FICA”) as a whole, and failure to comply may lead to substantial penalties imposed by the Financial Intelligence Centre (“the FIC”).
The Amendment Act has mandated that the recently added AIs listed in Schedule 1 must promptly comply with FICA in its entirety. These new AIs include:
- All High-Value Goods Dealers who sell a single item for R100 000 or more, regardless of how payment is made (eg: cash, EFT, crypto etc)
- Advocates that practise with a fidelity fund certificate
- Trust and Company Service Providers (eg: being involved in the creation, operation and management of an external company, a foreign company, a close corporation or a trust)
- Credit Providers who are subject to the National Credit Act (NCA) and a person who carries on the business of providing credit in terms of any credit agreement outside of the NCA
- Crypto Asset Service Providers
- Co-operative banks
- The South African Mint Company regarding the distribution of non-circulation coins in retail trade
- Money or “Value” Transfer Providers (eg: a Clearing Systems Participant under the National Payment Systems Act; foreign exchange providers; non-bank mobile money service providers (e.g. airtime transfers etc.)
FICA imposes a variety of obligations on all AI’s, which include:
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The obligation to register an accountable institution with the FIC;
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Formulate and implement a Risk Management and Compliance Programme (“RMCP”):
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Implementation of an RMCP by AI’s is critical to ensuring compliance with the Act.
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The RMCP should include, amongst others, an AI’s RMCP policy document, procedures, systems and internal controls directed at risk assessment and these should be tailored to the AI’s particular business.
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FICA requires the RMCP to enable AI’s to identify, assess, monitor, mitigate and manage risk arising from the provision of its products or services. The RMCP incorporates various aspects relating to customer identification and verification, ongoing and enhanced due diligence measures and record keeping.
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- Continuous employee training; and
- Conducting ongoing due diligence on clients.
The newly added AIs are required to promptly adhere to the amendments and ensure that their risk-based approach towards implementing their RMCP, appointing a compliance officer and other relevant reporting officers, fulfilling reporting obligations, and conducting ongoing client due diligence is constantly monitored, reviewed, and adjusted in order to remain fully compliant with the present changes and any future changes that may arise.
Despite the significant burden placed on recently added AIs due to these changes, it is imperative that we collaborate to make a meaningful impact towards shedding our greylisting status. We must continue to actively participate in combating money laundering and terrorist financing in our beautiful and unique country, thus, facilitating a prosperous future for business opportunities for all.