The government is taking a giant step to avoid possible gray lists



Both houses of Parliament have approved two major pieces of legislation that could prevent South Africa from being graylisted by the Financial Action Task Force (FATF).

The General Laws (Anti-Money Laundering and Combating the Financing of Terrorism) Amendment Bill as well as the Protection of Constitutional Democracy Against Terrorism and Related Activities Bill come into force in February of this year next, when the FATF plenary session takes place in Paris, France.

The FATF identified weaknesses in the effective investigation and prosecution of money laundering, terrorist financing, corruption, tax crimes and fraud in SA.

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Amelia Warren, candidate lawyer at ENSafrica, says the government can now demonstrate that it has taken concrete steps to remedy the technical deficiencies that were identified.

Political interventions

The two amendment bills will address 16 of the 20 technical areas of non-compliance identified by the FATF. They were presented to the National Assembly in July and August, and approved by the National Council of Provinces on December 13.

They will now be sent to the president for assent and become law after the normal constitutional process has been followed.

The remaining deficiencies will be addressed by smaller legislative measures and other amendments, including the recent amendments to the Financial Intelligence Center Act (Fica) schedules.

This includes:

Recommendation 1: Risk assessment and application of a risk-based approach. This recommendation states that countries should identify, assess and understand the money laundering and terrorist financing risks they face, and apply resources to ensure that the risks are effectively mitigated.

Recommendation 2: National cooperation and coordination. Countries should ensure that policymakers, law enforcement agencies, supervisors and other relevant competent authorities have effective mechanisms to enable them to cooperate in the development and implementation of policies and activities to combat money laundering and the financing of terrorism.

Recommendation 14: Money or value transfer services. Countries should take steps to ensure that natural or legal persons providing money or value transfer services are licensed or registered (mainly addressed in the Fica amendments).

Recommendation 32: cash couriers. Countries should have measures in place to detect the physical cross-border transport of currencies and bearer negotiable instruments, including through a reporting or disclosure system.

Committed to the fight against corruption

The National Treasury says in a statement that the approval of the bills demonstrates the government’s commitment to fighting corruption and the financing of terrorism. “It represents a giant step towards South Africa meeting the 40 FATF recommendations.”

“When enacted into law, the two bills will enhance South Africa’s adherence to international best practices in the fight against financial crime and corruption,” he adds.

ALSO READ: SA could be at risk of being slapped with a gray rating

The amendments to the Fica schedules mean that a wider category of credit providers, dealers of high-value goods, informal money providers, the South African Mint, co-operative banks and crypto-asset service providers are now in the network of responsible institutions.

The Financial Intelligence Center (FIC) earlier said the increased sector coverage will address the extent of weaknesses identified by the global money laundering and terrorist financing watchdog.

“The additional sectors will enhance the FIC’s ability to obtain information about the financial activities of clients from a wider range of financial, non-financial institutions and crypto-asset service providers,” the FIC said in a statement.

Era Gunning, Banking and Finance Executive at ENSafrica, explains that companies dealing in high value goods and receiving payments in any form for a value of R100,000 or more will need to register with the FIC as a responsible institution and comply with the provisions of the act.

This means they will need to implement customer due diligence (including identification and verification), appoint a money laundering control officer and establish a risk management and compliance program that sets out the approach based on the risk that the entity will follow to deal with the provisions. . of the act Employees will have to undergo training to comply with Fica to detect possible non-compliance.

READ ALSO: Phala Phala report: SA may be greylisted if Ramaphosa does not resign

Broader powers for the regulator

To address weaknesses in SA’s ability to investigate and prosecute financial crime and corruption, the role of the regulator has been modified. In the future it will be able to produce forensic evidence and request information from other state bodies. This expands the FIC’s power and scope to implement the law, Warren previously told Moneyweb.

Another modification refers to the identification of the beneficial owners of companies and entities in the Commercial Companies Law. A beneficial owner is the natural person who has control of a legal entity.

The responsible institution must identify who the “warm bodies” are to prevent people from laundering money by hiding behind a corporate structure.

A public register will be established, as has been done in the EU, to identify the beneficial owner of each company.

The changes to the timetables of the Fica are affective from Monday (December 19).

Gunning warns that there is still “a significant amount of work to be done” and that the amendments will mean a permanent increase in the administrative burden for many businesses.

This article originally appeared on Moneyweb and has been republished with permission.
Read the original article here.

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