Financial Crime World

Anti-Money Laundering (AML) and Combating Financing Terrorism (CFT) Practices in South African Banks

Introduction

A recent research study has shed light on the current state of AML/CFT practices in South African banks, specifically focusing on customer due diligence (CDD) measures. This article summarizes the key findings of the study and highlights the importance of regulatory compliance in the fintech era.

Research Methodology

The study employed a qualitative approach, utilizing purposive sampling to select 10 AML/CFT experts from South Africa’s banking sector. Data was collected through secondary sources (Wolfsberg AML/CFT questionnaire) and primary sources (interviews with experts).

Key Findings

  • Low Level of Compliance: Only 12 out of 34 registered banks in South Africa followed the Wolfsberg AML/CFT questionnaire, indicating a low level of compliance.
  • Use of Third-Party Vendors: Most banks rely on third-party vendors to assist in corroborating identity and verifying customer details.
  • Biometric Authentication: Biometrics (facial recognition and fingerprints) have been incorporated into onboarding processes, complying with FICA and POPI Act provisions.
  • Physical Onboarding Still Prevalent: Face-to-face or physical onboarding is still prevalent, although some banks offer digital or remote onboarding due to the COVID-19 pandemic.

The Role of Fintech Innovations

The study highlights the importance of AML/CFT regulatory compliance in the fintech era. Technological solutions developed by fintech companies can assist banks in performing CDD functions. However, care must be taken as fintech companies operate in an unregulated industry and are customer-centric.

Conclusion

The research provides valuable insights into the current state of AML/CFT practices in South African banks, emphasizing the need for improved compliance measures and the role of fintech innovations in addressing regulatory challenges. As the banking sector continues to evolve, it is crucial that banks prioritize regulatory compliance and leverage fintech solutions to stay ahead of emerging risks.