SA told to beef up anti-money laundering measures

South Africa is expected to take remedial steps within 18 months to address the “significant weaknesses” in parts of the country’s system to combat money laundering and the financing of terrorism and weapons of mass destruction, National Treasury said in a statement. This follows the release of the Financial Action Task Force’s third Mutual Evaluation Report.

The mutual evaluation of South Africa was conducted from April 2019 to May 2021 by a team led by the International Monetary Fund. It included officials from the Eastern and Southern Africa Anti-Money Laundering Group and the Financial Action Task Force (FATF) member countries, Treasury and the Financial Intelligence Centre said in a joint statement.

The FATF is an international body that promotes policies and standards for combating money laundering (ML), terrorist financing (TF), and the financing of the proliferation of weapons of mass destruction. South Africa became a member of the FATF in 2003 and is one of 39 member countries.

“Cabinet was briefed on the outcomes of the assessment on 1 September 2021, and recognised the findings and weaknesses brought to the attention of the South African government. The government is fully committed to implementing the recommendations contained in the report, and strengthening the entire system for investigating financial crimes, including the fight against corruption,” Treasury said.

The “priority actions” identified by the report that South Africa needed to take included:

• Develop policies to address higher ML and TF risks for: (i) beneficial ownership; (ii) the use of cash and its cross-border movement; (iii) third-party ML; (iv) foreign predicate crimes; (v) and TF. All financial institutions, “designated non-financial businesses and professions” (DNFBPs) and crypto asset service providers should be subject to anti-money laundering and combating the financing of terrorism (AML/CFT) obligations unless they pose proven low risks. The DNFBPs to which report referred include dealers in precious metals and stones, accountants (for activities other than providing financial services) and company service providers other than attorneys.
• The SAPS Directorate for Priority Crimes Investigations should be provided with more staff, particularly financial investigators and forensic accountants, so that it can better use financial intelligence and place more emphasis on proactively identifying and investigating ML cases, particularly high level and complex cases such as those related to “state capture” and others involving third-party laundering, foreign predicates, ML networks and professional enablers.
• South Africa should ensure that AIs adequately implement a risk-based analysis, including through better assessing and understanding their inherent risks and refining and implementing their risk management and compliance programmes to mitigate their risks. The authorities should provide better guidance on these matters and on major ML/TF risks such as corruption.
• Make major enhancements to the effectiveness of measures at borders to detect and seize illicit cash flows and to identify and address unlicensed cross-border money value transfer services.
• Establish much better mechanisms to collect beneficial ownership information about companies and trusts, and train relevant law enforcement agencies about complex structures and how they can be abused for ML/TF purposes.
• Supervisory bodies (such as the FSCA) should improve how they conduct risk-based AML/CFT supervision, including by improving their understanding of inherent ML/TF risks at sector and institutional levels and using that to prioritise their supervisory activities.
• Ensure the securities sector, attorneys, estate agents, trust service providers, company service providers, and dealers in precious metals and stones are supervised or monitored for AML/CFT commensurate with their risk profiles, by increasing supervisory resources and closing gaps in sector coverage.