Financial Crime World

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South Africa Cracks Down on Money Laundering Techniques

In a bid to strengthen its financial integrity, South Africa has aligned its anti-money laundering (AML) measures with international standards, setting a robust example for other nations in the region. The country’s AML framework emphasizes thorough customer due diligence, vigilant transaction monitoring, and prompt reporting of suspicious activities by financial institutions.

A History of Evolution

South Africa’s AML initiatives have undergone significant evolution over the years, with policies dating back to the late 1990s when the government started coordinating with global guidelines and conventions on preventing the financing of terrorism and money laundering. The Financial Intelligence Center Act (FICA), which established the Financial Intelligence Centre (FIC) as the principal AML regulatory authority, was passed in 2001.

Key Requirements for Financial Institutions

Anti-money laundering requirements in South Africa are governed by FICA, which has undergone subsequent amendments to strengthen its provisions. Essential AML requirements include:

  • Customer Due Diligence: Financial institutions must conduct thorough CDD, including identifying and verifying customers’ identities and beneficial owners.
  • Suspicious Transaction Reporting: Reporting entities, including banks and other financial institutions, must report suspicious transactions to the Financial Intelligence Centre (FIC).
  • Record Keeping: FICA mandates the maintenance of records related to customer transactions and due diligence for at least five years.
  • Politically Exposed Persons (PEP) Screening: Enhanced due diligence is required for PEPs to mitigate the risks associated with their involvement in money laundering.

Penalties for Non-Compliance

In South Africa, penalties for money laundering are outlined in the Prevention of Organized Crime Act (POCA) and FICA. The severity of penalties varies depending on the nature and extent of the offense. Key penalties include:

  • Criminal Offenses: Money laundering is a criminal offense under POCA, and individuals found guilty can face imprisonment for 30 years.
  • Seizure and Forfeiture: The state can seek the forfeiture of assets involved in or derived from money laundering.

A Commitment to Compliance

In its bid to strengthen AML measures, South Africa has made a high-level political commitment to work with the Financial Action Task Force (FATF) and Eastern and Southern Africa Anti-Money Laundering Group (ESAAMLG). The country has taken steps towards improving its AML/CFT regime during the first cycle of 2023, including by enhancing its criminalization of terrorist financing.

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