The Minister of Finance has tabled the General Laws (Anti-Money Laundering and Combatting of Terrorism Financing) Amendment Bill 18 of 2022 (Amendment Bill) in Parliament. This signifies a significant step by South Africa in addressing the deficiencies identified by the Financial Action Task Force (FATF`s) Mutual Evaluation Report (MER) of South Africa, published October 2021.
The Amendment Bill seeks to strengthen the country’s Anti-Money Laundering and Combating of Financing of Terrorism (AML/CFT) laws. The proposed amendments of five pieces of legislation (Trust Property Control Act, 1988; Non-profit Organisations Act, 1997; Financial Intelligence Centre Act, 2001; Companies Act, 2008 and the Financial Sector Regulation Act, 2017) seek to fully satisfy the technical compliance deficiencies that were identified in the MER.
As a result of South Africa`s very poor rating in its mutual evaluation, South Africa was placed in an enhanced follow-up process (involving more frequent reporting to the FATF) as well as placed in a one-year observation period ending October 2022. This follow-up process requires the submitting of a report to the FATF at the end of August 2022 together with demonstrating improvements in (i) the legal framework (technical compliance) and (ii) effectiveness in combating financial crimes. A FATF grey listing, which is made public, is likely to have the effect of increasing the cost of doing business for South African businesses with foreign trading partners.
South Africa will have the task of demonstrating the effectiveness of its AML/CFT laws and frameworks, including demonstrating that the country has credible national risk assessments to deal with money laundering and terrorist financing, that its supervisory authorities in the financial sector have appropriate risk-based approaches, and most importantly, that the country’s investigative and prosecuting authorities are able to demonstrate speedy investigations, prosecutions and asset forfeitures for financial crimes and corruption.
The effectiveness of an AML/CFT framework is measured by 11 Immediate Outcomes. It is imperative that the country demonstrates in the next 6 months that it has made significant progress in addressing the deficiencies in the FATF recommendations and all 11 Immediate Outcomes, to ensure that South Africa avoids being grey listed by the FATF at its February 2023 Plenary meetings.
In the months to follow, parliament will guide on the process for considering the Amendment Bill, including the timing for taking public comments, making amendments and the passing of the Amendment Bill.