The National Assembly on Tuesday passed the General Laws (Anti-Money Laundering and Combating Terrorism Financing) Amendment Bill, one of two bills aimed at preventing the Financial Action Task Force (FATF) from grey-listing South Africa in February next year.
The amendment bill was opposed by the opposition parties, except for the Inkatha Freedom Party.
The bill amends five pieces of legislation to remedy deficiencies relating to the adequacy of the country’s laws and legal frameworks when measured against the FATF’s 40 Recommendations (standards). These deficiencies were identified by the FATF in its Mutual Evaluation Report last year.
The five Acts are the Trust Property Control Act, the Non-profit Organisations Act, the Financial Intelligence Centre Act, the Companies Act, and the Financial Sector Regulation Act.
The bill introduces provisions that will require companies, trusts and certain non-profit organisations (NPOs) to disclose and report on their beneficial owners.
Minister of Finance Enoch Godongwana said the bill addresses the deficiencies in at least 14 of the 20 recommendations in the Mutual Evaluation Report, including an “appropriate” enhancement of powers and procedures for regulatory authorities.
“These technical compliance deficiencies represent one half of the exam we must pass,” Godongwana said.
The Protection of Constitutional Democracy against Terrorist and Related Activities Amendment Bill, which is before Parliament, addresses two further recommendations. The remaining four recommendations are being addressed via “policy processes and mechanisms”.
In addition to the two bills, Godongwana said the country is working to improve the effectiveness of its anti-money laundering and anti-terrorism financing system. “This represents the second half of the exam we must pass.”
Godongwana said that by passing the General Laws Amendment Bill, the National Assembly “demonstrates its commitment to not only addressing the issues which risk the grey-listing by FATF, but more importantly, this government’s commitment to rooting out and preventing financial crime and the proceeds of corruption”.
The Cabinet has established an Interdepartmental Committee (IDC) on anti-money laundering and the combating of terrorism financing to co-ordinate activities across the departments, authorities and entities.
Godongwana said he believed that, through the IDC, the government has made “the significant progress in improving effectiveness, as well as the legislative changes, that FATF needs to see for us to pass this exam and avoid grey-listing”.
Legislation ‘rushed through’
The National Assembly’s Standing Committee on Finance (Scof) has expressed its disapproval at the haste with which the bill has been pushed through Parliament, as well as the Cabinet’s decision to allow National Treasury to waive conducting a study to assess the bill’s socioeconomic impact, as is the case with all legislation.
Read: MPs decline to process omnibus anti-grey-listing bill
“The committee does not encourage the processing of legislation in this fashion but understands the urgency of preventing South Africa being grey-listed by FATF in February 2023,” ANC MP Noxolo Abraham told the Assembly, reading a speech prepared by Scof’s chairperson, Joe Maswanganyi.
Freedom Front MP Wouter Wessels said the threat of grey-listing did not justify passing bad laws and rushing them through Parliament. The executive had steamrollered the process, regarding the legislature as a rubber stamp.
“The legislation is rushed, ill-considered and will have unintended detrimental consequences, especially for NGOs. And who will suffer the most? The poor,” he said.
The Democratic Alliance’s Dion George said the bill does not guarantee that South Africa won’t be grey-listed.
“The fundamental problem lies with the prosecution of perpetrators of these financial crimes, and no amount of legislation can fix the systemic corruption or generate the political will to act.”
NPO registration still an issue
When the bill was processed by Scof, there was vehement opposition from stakeholders to the bill’s requirement that all non-profits would have to register with the Department of Social Security’s NPO Directorate. This resulted in Treasury altering the amendments to the NPO Act to make registration mandatory only for organisations that make donations to organisations or individuals outside South Africa or that provide humanitarian, religious or cultural services outside the Republic.
Read: MPs accept refinements to omnibus anti-money laundering amendment bill
Nevertheless, this “watered-down” provision was criticised by opposition MPs during Tuesday’s debate.
George said: “This dysfunctional department [Social Security] can’t even deliver on its current mandate of paying social grants.”
The African Christian Democratic Party’s Steven Swart criticised the bill for requiring NPOs that were already registered with the Companies and Intellectual Property Commission, the South African Revenue Service or the Master’s Office (as charitable trusts) to register with the directorate.
In his closing remarks at the end of the debate, Godongwana insisted that Treasury had not steamrollered the legislation through Parliament. The conditions were not of Treasury’s choosing, and political parties needed to bury their differences in the national interest, he said.
The General Laws Amendment Bill will be sent to the National Council of Provinces (NCOP) for concurrence. The NCOP’s Select Committee on Finance has begun processing the bill so that it can be passed by both Houses of Parliament before the December recess.
Click here to download the version of the bill that was passed on Tuesday.
