Financial Crime World

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Anti-Money Laundering (AML) and Counter-Terrorist Financing (CTF) Measures in South Africa

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The Financial Action Task Force (FATF) report assesses South Africa’s compliance with international standards for AML/CTF. Here are the main points from the report:

Supervision

  • Beneficial Owners: Fit and proper criteria are not applied to beneficial owners.
  • Self-Disclosure and Verification: Regulators rely heavily on self-disclosure, and there is little verification done by competent authorities on criminal record checks.
  • Unlicensed Cross-Border Money Transfer Services (MVTS): Unlicensed MVTS are not systematically identified, sanctioned, or removed from the market.

Risk Assessment

  • Interim Sector Risk Assessments: Interim sector risk assessments were completed for most sectors covered in the South African regime.
  • Supervisors’ Understanding of ML Risks: Supervisors demonstrated varied levels of understanding of ML risks for their respective sectors, with some showing a relatively good understanding and others limited or negligible extent.
  • Institutional Level Risk Ratings: Banks and ADLA are the only AIs rated for ML/TF risks at the institutional level.

Enforcement

  • Sanctions: Sanctions imposed by supervisors are often too low and infrequent to be dissuasive or effective.
  • Enforcement of FIC Act: Financial supervisors demonstrated some impact in improving FIs’ compliance with basic obligations, but enforcement of the amended FIC Act has only started since April 2019.

Transparency and Beneficial Ownership

  • Legal Persons and Arrangements: Different types of legal persons can be created in South Africa, including trusts, which are mostly inter-vivos or testamentary trusts.
  • Publicly Available Information: Information on creation of legal persons and arrangements is publicly available, but there is a challenge with the turnaround time for information about companies registered before 2016.

Overall Assessment

  • Need for Improvement: All supervisors in South Africa need major or fundamental improvements to conduct AML/CTF risk-based supervision effectively.
  • Gaps Remain: The country has made progress in some areas, but significant gaps remain, particularly in understanding and addressing ML/TF vulnerabilities.