By Lehlohonolo Lehana.
South Africa is at great risk of being subject to increased monitoring (greylisted) by the Financial Action Task Force (FATF) due to weaknesses in the country’s ability to enforce anti-money laundering and terrorism-funding regulations.
Wim de Bruyn, Capitec’s chief information officer, says that the bank is actively working with the South African Reserve Bank (SARB) on avoiding a greylisting.
De Bruyn said that the banking industry as a whole is doing everything it can and is cognisant of the new tweaks, enhancements and additional requirements that are being put in place to mitigate possible money laundering and terrorist financing in the country.
“If it were to happen, we are planning for what impact it may have,” said De Bruyn. Capitec, as primarily a retail bank, will, however, see less of an impact compared to banks that conclude lots of cross-border transactions.
Graham Lee, the divisional executive for client experience for the bank, added that the discourse around greylisting is dependent on what government wants to do.
He said that the new mechanisms of managing a possible greylisting relate to the criminal justice system and the ability of suspicious financial activity to be uncovered and prosecuted.
In July of this year, the SARB’s Prudential Authority warned banks within the country that they are at high risk of being used for financial crimes.
This follows a report by the international watchdog, the Financial Action Task Force (FATF), that identified significant weaknesses in parts of South Africa’s financial regulation.
The banking industry in South Africa is generally considered to be at high risk for money laundering, financing of terrorism, and proliferation financing (funding of nuclear or chemical weapons and their components), according to the Prudential Authority (PA). However, the greatest risk is concentrated at the top, among the five largest banks.
Cabinet has announced the approval of new amendment bills that seek to take on money laundering and terrorist financing in the country.
Recommendations made by the FATF are being addressed through amendments, in the form of bills, to the following pieces of legislation:
- Financial Intelligence Centre Act;
- Nonprofit Organisations Act;
- Trust Property Control Act;
- Companies Act;
- Financial Sector Regulations Act, and;
- The Protection of Constitutional Democracy Against Terrorist and Related Activities Act.
South Africa has until the beginning of October to show the FATF that there is a sufficient plan to address these shortfalls in order to avoid a greylisting that could make doing business in the country even harder – with more compliance steps required in certain transactions.