Finance Minister Enoch Godongwana has introduced the Anti-Money Laundering and Combating Terrorism Financing Amendment Bill in Parliament to reiterate the government’s commitment to halting illegal money flows.
This comes following the Cabinet’s meeting on August 17, 2022, when it was authorised for the Bill to be introduced in Parliament.
The National Treasury stated in a statement that the government’s commitment to the battle against corruption, money laundering, and funding of terrorism was shown by the decision.
The Treasury released a statement in which it claimed that the move “signals a substantial step towards correcting the weaknesses highlighted by the Financial Action Task Force (FATF(MER) )’s Mutual Evaluation Report (MER) of South Africa, issued by the FATF in October 2021.”
When it becomes legislation, it will increase South Africa’s compliance with global standards for battling corruption and financial crime.
“The Amendment Bill proposes major revisions to numerous pertinent legislation pertaining to the fight against financial crimes in an effort to enhance the nation’s anti-money laundering and combating the financing of terrorism (AML/CFT) regulations.
In order to fully address the technical compliance deficiencies (deficits relating to the adequacy of laws and legal frameworks related to the 40 FATF Recommendations) that were identified in the Mutual Evaluation Report, five pieces of legislation that are administered by various Ministers have been proposed for amendment.
Due to its poor performance in the mutual evaluation, South Africa has been put into an enhanced follow-up phase that requires more regular reporting to the FATF until all shortcomings have been corrected.
South Africa was likewise put into a one-year monitoring period, according to the Treasury (from October 2021 to October 2022).
South Africa is obliged to submit its first follow-up report to the FATF by the end of August 2022 and a second report in October 2022 in order to be prepared for the FATF Plenary in February 2023.
In order to go forward with this procedure, it must be shown that the legal system has improved (technical compliance) and is successful in preventing financial crimes.
listing in grey
The cost of doing business for South African enterprises with overseas trade partners would undoubtedly increase as a result of a FATF grey listing.
Treasury has been collaborating closely with representatives from the Departments of Justice and Constitutional Development, Trade, Industry and Competition, Social Development, the Financial Intelligence Centre, the Companies and Intellectual Property Commission, and the South African Revenue Service through an interdepartmental and agency committee on AML/CFT since the publication of the Mutual Evaluation Report.
It is led by the Director-General of National Treasury and is responsible for creating a draught Bill as well as an action plan to avoid grey listing.
“The South African government has also received technical support from the World Bank and the European Union to learn from their experiences and improve the AML/CFT system in order to better combat financial crime and corruption and avoid the nation being placed on the “grey list.
“All revisions across many Acts are combined in one omnibus bill to ensure that the essential legislation are adopted as quickly as feasible in accordance with the requirement to demonstrate progress in our report back to the FATF.
addressing shortcomings
Parallel to this, Parliament is now considering the Protection of Constitutional Democracy against Terrorist and Related Activities Amendment Bill, 2022, which will likely become law by November 2022 (administrated by the Minister of Police).
At least 14 of the 20 proposals in the amendment bill are intended to be improved, including the rightly enhancing of the powers and practises for regulatory bodies.
Two further (and crucial) proposals are covered by a different law, the Protection of Constitutional Democracy from Terrorist and Related Activities Amendment Bill, 2022.
The remaining four insufficient suggestions will be addressed via the development of policy procedures and mechanisms by October/November 2022.
The following statutes would be modified by the Amendment Bill:
Trust Property Control Act of 1988: Minister of Justice and Correctional Services; Nonprofit Organizations Act of 1997: Minister of Social Development; Financial Intelligence Center Act of 2001: Minister of Finance; Companies Act of 2008: Minister of Trade, Industry and Competition; Financial Sector Regulation Act of 2017: Minister of Finance.
Treasury said that it should be emphasised that South Africa would have the more difficult burden of proving the efficacy of its AML/CFT rules and regulations, in addition to effectively fixing all or the majority of the 20 technical shortcomings before the end of the year.
“This includes demonstrating that the nation has credible national risk assessments to address money laundering and terrorism financing, that its supervisory authorities, both in the financial sector and in non-financial sectors like the legal profession, the gambling industry, and estate agents, all have appropriate risk-based approaches, and most importantly, that the nation’s investigative and prosecuting authorities are able to demonstrate swift investigations, prosecutions, and convictions.
The timeline for soliciting public input, holding hearings, holding amendments, and ultimately approving the Bill will all be governed by Parliament.