Financial Crime World

Financial Action Task Force (FATF) Report: Enhancing Anti-Money Laundering (AML) and Counter-Terrorist Financing (CFT) Measures in South Africa

Key Findings and Areas for Improvement

The FATF report highlights several areas where improvements are needed to strengthen AML/CFT measures in South Africa. These include:

Supervisors’ Understanding of Money Laundering Risks

  • The South African Reserve Bank’s Prudential Authority has a relatively good understanding of banks, while risks in high-risk sectors like estate agents and attorneys are understood to a limited or negligible extent.
  • There is a need for enhanced training and resources for supervisors to better understand money laundering (ML) risks in their respective sectors.

Inspections and Supervision

  • All supervisors in South Africa need significant improvements to conduct AML/CFT risk-based supervision effectively.
  • Inspections are too infrequent for some supervisors, and attorneys are subject to essentially no AML/CFT oversight.
  • There is a need for more frequent and effective inspections, with a focus on the soundness of AML/CFT programs rather than just existence of basic controls.

Sanctions and Remedial Actions

  • The South African Reserve Bank’s Prudential Authority has applied a range of remedial actions and sanctions against banks for AML/CFT breaches, but these sanctions are not always proportionate or dissuasive.
  • Most other supervisors apply remedial actions, but the sanctions imposed are often too low and infrequent to be effective.
  • There is a need for proportionate and dissuasive sanctions for AML/CFT breaches, and ensure that remedial actions are effective in improving compliance.

Beneficial Ownership Information

  • There is a challenge with obtaining adequate, accurate, and current beneficial ownership (BO) information.
  • Basic information on companies and trusts can be obtained, but it’s not easily accessible, especially for companies registered before 2016.
  • There is a need to enhance the public availability of BO information, including for companies registered before 2016, and reduce the turnaround time for this information.

Recommendations

To address these issues, the FATF recommends that South Africa:

  1. Improve supervisors’ understanding of ML risks: Enhance training and resources for supervisors to better understand ML risks in their respective sectors.
  2. Enhance inspections and supervision: Conduct more frequent and effective inspections, with a focus on soundness of AML/CFT programs rather than just existence of basic controls.
  3. Increase sanctions and remedial actions: Apply proportionate and dissuasive sanctions for AML/CFT breaches, and ensure that remedial actions are effective in improving compliance.
  4. Improve access to BO information: Enhance the public availability of BO information, including for companies registered before 2016, and reduce the turnaround time for this information.

By addressing these areas, South Africa can strengthen its AML/CFT measures and improve its effectiveness in preventing money laundering/terrorist financing.