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AML/CTF Compliance in South Africa

WHAT ARE THE

Money laundering and terrorism financing laws in South Africa?

In South Africa, money laundering and terrorism financing are serious offences and are governed by the Financial Intelligence Centre Act, 2001 (FICA) and its associated regulations

WHAT ARE THE

Key obligations that reporting entities have under South African laws?

The key obligations under the AML/CTF laws in South Africa include:

  • Customer Due Diligence (CDD) - covered entities, including banks, financial institutions, money remitters, attorneys, and other accountable institutions, are required to establish and implement risk-based CDD measures. This includes verifying the identity of customers, obtaining beneficial ownership information, and assessing the risk associated with each customer.
  • Reporting Suspicious and Unusual Transactions - covered entities must report any suspicious or unusual transactions or activities that may be related to money laundering, terrorism financing, or other unlawful activities to the Financial Intelligence Centre (FIC). The reports should be made promptly when suspicion or unusual activity arises.
  • Record-Keeping - covered entities must maintain records of transactions, customer identification information, and supporting documentation for at least five years from the date of the last transaction. These records should be readily available for examination by regulatory authorities.
  • Compliance Programs - covered entities are expected to establish and maintain effective AML/CFT compliance programs. This includes implementing internal policies, procedures, and controls to detect, prevent, and report money laundering and terrorism financing activities. Staff training and regular independent audits are also important components of these programs.
  • Politically Exposed Persons (PEPs) - covered entities are required to implement enhanced due diligence measures for customers who are identified as PEPs. This includes obtaining additional information and conducting ongoing monitoring of the business relationship.

WHO ARE THE

ML/TF regulators in South Africa and what functions do they perform?

In South Africa, the regulators responsible for overseeing and enforcing anti-money laundering (AML) and counter-terrorism financing (CTF) measures are primarily:

  • Financial Intelligence Centre (FIC) - the FIC is the primary regulatory authority in South Africa responsible for combating money laundering and terrorism financing. It receives, analyses, and disseminates financial intelligence reports and ensures compliance with AML/CTF regulations.
  • South African Reserve Bank (SARB) - the SARB is the central bank of South Africa. It plays a role in regulating and supervising banks, financial institutions, and certain non-bank financial institutions to ensure compliance with AML/CTF requirements.
  • South African Revenue Service (SARS) - the SARS is responsible for collecting tax revenue in South Africa. It also plays a role in combating financial crimes, including money laundering, through its enforcement and investigation efforts.
  • Financial Sector Conduct Authority (FSCA) - the FSCA is the regulatory authority for the non-banking financial sector in South Africa. It regulates and supervises financial services providers, including investment firms, collective investment schemes, and insurance companies, with a focus on consumer protection and market integrity.
  • National Prosecuting Authority (NPA) - the NPA is responsible for prosecuting criminal offences in South Africa. It works in collaboration with other law enforcement agencies to investigate and prosecute cases related to money laundering and terrorism financing.

South Africa actively cooperates with international counterparts in combating money laundering and terrorism financing. This involves exchanging information, cooperating on investigations, and providing assistance to other jurisdictions when requested.

WHAT ARE THE

Penalties for non-compliance with AML/CTF laws?

In South Africa, the penalties for non-compliance with money laundering and terrorism financing laws can vary depending on the specific offence committed and the provisions violated. Here are some potential fines and penalties that may apply:

  • Administrative Penalties - the Financial Intelligence Centre (FIC) and other competent authorities have the authority to impose administrative penalties for non-compliance with AML/CFT requirements. These fines can vary depending on the severity and frequency of the violation, but they can be significant.
  • Criminal Offences - individuals or entities convicted of money laundering or terrorism financing offences can face fines imposed by the courts. The fines can vary based on the nature and severity of the offence.
  • Imprisonment - convictions for money laundering or terrorism financing offences can result in imprisonment for individuals involved in such activities. The length of imprisonment can vary based on the offence.
  • Forfeiture of Funds and Assets - Authorities have the power to seize and forfeit funds and assets that are determined to be involved in or derived from money laundering or terrorism financing activities. This can include freezing bank accounts, confiscating properties, or seizing other assets.

WHAT ARE THE

Largest fines for non-compliance with AML/CTF laws?

South African regulators have show they are willing to take action for non-compliance with AML/CTF laws and have used their powers extensively, below is an example of some of the largest fines for non-compliance with anti-money laundering laws:

  • Standard Bank - Standard Bank, one of the largest banks in South Africa, agreed to pay a penalty of ZAR 1.8 billion to the South African Reserve Bank (SARB) for weaknesses in anti-money laundering controls. The fine was related to non-compliance with the Financial Intelligence Centre Act (FICA) and deficiencies in customer due diligence processes.
  • FirstRand Bank - In 2010, FirstRand Bank, one of the largest banking groups in South Africa, agreed to pay a penalty of ZAR 30 million to the SARB for deficiencies in anti-money laundering controls. The fine was imposed due to weaknesses in customer due diligence and transaction monitoring.
  • Nedbank - In 2018, Nedbank, one of the major banks in South Africa, was fined ZAR 14 million by the SARB for non-compliance with the FICA. The fine was related to failures in customer due diligence processes and transaction monitoring.

The SARB publishes a list of Administrative Penalties that it has imposed on Banks and Insurance Companies on its website.