Bill proposes wide-ranging changes to strengthen AML regime

National Treasury today published draft amendments to four pieces of legislation designed to strengthen the country’s anti-money-laundering (AML) regime.

The draft General Laws (Anti-Money Laundering and Combating Terrorism Financing) Amendment Bill, 2024 proposes amendments to the Companies Act, the Financial Intelligence Centre Act (FICA), the Financial Sector Regulation Act (FSRA), and the Nonprofit Organisations Act (NPO Act).

Treasury said the amendments aim to bolster South Africa’s AML regime in response to the Financial Action Task Force (FATF) mutual evaluation in 2021 and to ensure compliance ahead of the next FATF evaluation in 2026/27.

According to Treasury’s statement, the draft Bill reflects South Africa’s commitment to addressing deficiencies identified in its AML and combating the financing of terrorism system, with the goal of improving compliance and exiting the FATF grey list.

Amendments to the Companies Act

The Bill proposes several changes to the Companies Act, including:

• Section 82: This amendment requires the Companies and Intellectual Property Commission (CIPC) to deregister a company (or close corporation) if it fails to submit a securities register or beneficial interest register annually, as prescribed in section 33 of the Act.
• Section 171: The CIPC will be empowered to impose administrative fines on companies that fail to comply with the submission requirements for the securities or beneficial interest registers.
• Section 175: The CIPC will be authorised to impose fines for non-compliance with issued compliance notices under section 171(8).
• Section 175A: A new provision allows individuals subject to administrative fines to apply to the Companies Tribunal for a review.

 

Amendments to the Financial Sector Regulation Act

The Bill introduces changes to the FSRA to enhance the regulatory framework for financial services, including:

Definition of ‘making a financial investment’ (section 2(3))

The proposed reworded definition is:

“(3) For the purposes of subsection (2)(b)(ii), a person makes a financial investment—

(a) when the person (the ‘investor’) gives a contribution of economic value to another person or arrangement and any of the following apply:

(i) The contribution is used to generate a financial return for the investor;

(ii) the investor intends that the contribution will be used to generate a financial return for the investor, even if no return, or a loss, is in fact generated; or

(iii) the other person or arrangement represents or implies in any manner that the contribution be used to generate a financial return for the investor, even if no return, or a loss, is in fact generated; and

(b) irrespective of whether the investor has day-to-day control over the use of the contribution.”

 

New services regulation (section 3(3)(a))

This provision will expand the regulation of financial products and services to include new arrangements and technologies that may pose money laundering or terrorist financing risks.

Treasury said the amendment will enable the Minister of Finance to identify and assess the money laundering or terrorist financing risks that may arise in relation to the development of new products and business practices and the use of new or developing technologies for new and pre-existing products. If deemed necessary, the minister can designate new financial products or services to be regulated, to ensure that regulation keeps abreast with the development of new financial products and services, and innovation and technology.

 

Licensing financial institutions (sections 111 and 113)

These amendments empower the responsible authority to license financial institutions offering new or emerging financial products, regardless of other existing licensing requirements.

Section 111(1) currently stipulates that a person may not provide, as a business or part of a business, a financial product designated in terms of section 2, or a financial service designated in terms of section 3, except in accordance with a licence in terms of Chapter 8 of the FSRA.

Treasury said it is important that in certain circumstances, responsible authorities are enabled to license financial institutions despite these institutions being licensed in terms of other legislation to ensure that the responsible authority may execute its mandate appropriately and that a “competent authority” as envisaged in FATF Recommendation 15 is able to impose AML requirements.

 

Additional powers for regulators (sections 131 and 135)

Section 131 proposes to empower financial sector regulators to obtain information from significant owners or beneficial owners.

Section 135 will empower financial sector regulators to institute an investigation if the regulator suspects that a financial sector law has been contravened, may be in the process of being contravened, or may be about to be contravened.

An amendment to section 166S(9) will exclude transactions concluded under a “master agreement” as defined in section 35B(2) of the Insolvency Act from the application of section 166S(7) of the FSRA.

 

Amendments to the Financial Intelligence Centre Act

The Amendment Bill proposes significant updates to FICA, including:

Expansion of the ‘authorised officer’ definition (section 1)

This change will include the Public Procurement Office in the definition of “authorised officer”. Other amendments will allow for the Financial Intelligence Centre (FIC) to share information with the Public Procurement Office.

 

Expanded sanctions monitoring (section 26A)

Section 26A deals with the implementation of resolutions adopted by the United Nations Security Council. The amendment expands the requirement for the Director of the FIC to give notice of sanctioned entities to include an entity identified by the National Director of Public Prosecutions (NDPP) in respect of which a High Court has made an order pursuant to section 23 of the Protection of Constitutional Democracy against Terrorist and Related Activities Act, as well as a variation, rescission, or setting aside of an order published by the NDPP.

 

Extraordinary expenses (section 26C)

Section 26C provides for the Minister of Finance to permit a person to conduct financial services or deal with property under certain circumstances. The amendment expands the circumstances to include providing for extraordinary expenses.

It also empowers the Minister to permit the accrual of interest or other earnings due on accounts holding property affected by a prohibition under section 26B of FICA that arose before the date on which the person or entity was identified by the United Nations Security Council.

 

Reporting obligations for accountable institutions (sections 28A and 30)

A revised section 28A will impose reporting obligations on accountable institutions that have in their possession or under their control, property owned or controlled by or on behalf of, or at the direction of, a person or entity sanctioned by the UN Security Council.

A proposed amendment to section 30, which requires a person authorised by the Minister of Finance to receive a report relating to the conveyance of cash to or from the Republic, will enable the minister to prescribe a period in which a copy of the report must be sent to the FIC.

 

New technologies (section 42)

Amendments to section 42 will require accountable institutions to take into account the risk that new delivery mechanisms or new or developing technologies may involve or facilitate money laundering activities, the financing of terrorist and related activities, or proliferation-financing activities.

 

Non-compliance penalties (section 46)

The Bill introduces penalties for accountable institutions that engage in business relationships or single transactions with anonymous or fictitious clients in violation of FICA. Section 20A states that accountable institutions are not allowed to establish a business relationship with an anonymous client, complete a single transaction with an anonymous client, or complete a transaction with a client who has a false or fictitious name.

Section 51A will be revised to deal with the offence or act of non-compliance relating to the reporting obligations in section 28A, which requires accountable institutions to report to the FIC if they know they have property linked to terrorism or UN-sanctioned entities.

Amendments to the Nonprofit Organisations Act

The Bill proposes to amend section 30 of the NPO Act to provide for a maximum penalty of R1 000 000 or a maximum term of imprisonment of five years, or both, for offences committed in terms of the NPO Act.

Public participation and next steps

Interested parties are invited to submit their written comments to National Treasury at Commentdraftlegislation@treasury.gov.za by close of business on 6 February 2025.

Once the comments have been received, Treasury will engage with stakeholders on selected issues. This engagement will occur through public workshops designed to facilitate discussions regarding the written comments. Subsequently, the updated draft Amendment Bill will be presented to Cabinet for consideration and then be tabled in Parliament.

Click here to download the draft General Laws (Anti-Money Laundering and Combating Terrorism Financing) Amendment Bill.