South Africa is ramping up efforts to fortify its anti-money laundering and combating terrorism financing (AML/CFT) framework. With the Financial Action Task Force (FATF) demanding compliance by May 2025, the National Treasury has unveiled critical amendments to the General Laws (Anti-Money Laundering and Combating Terrorism Financing) Amendment Bill. These changes aim to address deficiencies flagged by FATF while aligning with global standards to combat financial crimes.
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Strengthened Anti-Money Laundering Legislation Takes Center Stage
The proposed amendments underscore South Africa’s commitment to resolving six key FATF action items. By enhancing regulatory measures, the country hopes to demonstrate meaningful progress when FATF’s Africa Joint Group conducts its on-site evaluation in 2025.
One significant amendment is the increased penalty for non-compliant non-profit organizations (NPOs). Offenses could now attract fines of up to R1 million, five years of imprisonment, or both. These stringent measures reflect the government’s determination to tackle illicit activities.
Key Changes to the Financial Intelligence Centre Act
Enhanced Access for Restricted Funds
The Financial Intelligence Centre Act introduces a provision enabling entities or individuals under financial restrictions to access funds for extraordinary expenses, such as humanitarian aid. This process, subject to Finance Ministry approval, ensures critical needs are met without undermining AML efforts.
Mitigating Technology Risks
Institutions must conduct risk assessments before rolling out new financial products or services, especially those involving innovative technologies. This preemptive approach helps mitigate potential vulnerabilities while safeguarding the system against abuse.
Bolstered Reporting Obligations
Companies are now required to scrutinize their client databases for any associations with persons or entities flagged under Financial Intelligence Centre notices. Reporting of transactions involving these flagged individuals or entities must occur within a prescribed (yet-to-be-defined) timeframe, enhancing vigilance and accountability.
Overhaul of the Companies Act: A Focus on Transparency
New Deregistration Rules
The Companies and Intellectual Property Commission (CIPC) now holds the authority to deregister companies failing to submit securities and beneficial ownership registers. Companies in non-compliance for over a year risk deregistration, signaling a zero-tolerance approach to opaque corporate practices.
Heightened Penalties
Non-compliance penalties have been increased to R10 million or 10% of a company’s turnover during the breach period—whichever is higher. These hefty fines aim to deter negligence and encourage adherence to reporting standards.
Review Mechanism
Entities penalized under the Companies Act can now appeal to the Companies Tribunal for a review within 15 business days, offering a structured avenue for recourse.
Financial Sector Regulation Act: Adapting to Innovation
Broader Definitions of Financial Products
To keep pace with evolving financial technologies, the definition of financial products now encompasses blockchain-based services, decentralized finance (DeFi), and similar innovations. This change ensures that virtual assets and fintech solutions come under regulatory oversight.
Proactive Regulatory Powers
Regulators now have authority to act preemptively if they suspect or foresee a potential contravention. They can demand information from significant and beneficial owners, ensuring greater transparency and deterring the misuse of complex ownership structures.
Conclusion: A Pivotal Moment for Compliance
The National Treasury’s decisive amendments signify South Africa’s intent to meet FATF standards head-on. These reforms aim to strengthen the country’s financial integrity while fostering an environment of transparency and accountability. By addressing regulatory gaps and embracing innovation responsibly, South Africa positions itself as a global leader in combating financial crimes.
Related Links
- Financial Action Task Force Official Website
- National Treasury of South Africa
- Financial Intelligence Centre Act Overview
- Companies and Intellectual Property Commission
- Financial Sector Conduct Authority
- Global Anti-Money Laundering Trends
Other FinCrime Central Links about South Africa Ambitions
- South Africa’s Bold Progress on 5 FATF Recommendations
- Regulations Around the World: Anti-money laundering update
Source: MSN
