FATF places South Africa under increased AML monitoring regime
At a plenary meeting of the AML standards body on 24 February 2023, delegates agreed that South Africa has made 'significant progress' on many of the recommendations made after its most recent mutual evaluation in June 2021, but must continue to improve. The list of required improvements includes increasing requests to other countries for mutual legal assistance, improving risk-based supervision of designated non-financial business and professions, demonstrating that all AML supervisors apply proper sanctions for non-compliance, and enforcing the rules on giving competent authorities timely access to accurate and up-to-date beneficial ownership information.
The jurisdiction has also been told to increase both its law enforcement agencies' requests for financial intelligence in investigations and the number of investigations and prosecutions of serious and complex money laundering and terrorist financing activities. It must also improve its record on identification, seizure and confiscation of proceeds in a wider range of predicate crimes and implement comprehensive strategies on terrorism financing and targeted financial sanctions.
The FATF decision will subject South Africans with bank accounts overseas to enhanced due-diligence, says Johannesburg-based law firm ENSAfrica. The firm also notes that it ‘may become more onerous for other South Africans to open offshore bank accounts or invest offshore’.
The country has already made significant efforts to improve its regime. This includes the enactment of extensive legislative amendments in December 2022, requiring several new categories of institutions to register with the Financial Intelligence Centre (FIC). They include certain trustees and entities that assist others in establishing companies, the life insurance business, credit providers, financial services providers under the Financial Advisory and Intermediary Services Act, money transfer services, dealers in high-value goods and crypto-asset service providers. The FIC will be closely monitoring these sectors' compliance with the new obligations in order to meet the FATF standards as soon as possible, says ENSAfrica.
Accountable institutions must register within 90 days of the legislation becoming effective, which was 29 November 2022, meaning that registration with FIC is due at the beginning of March 2023. The associated obligations have already commenced, although FIC has said it does not envisage issuing financial penalties for non-compliance during the transitional 18-month period.
The Cayman Islands and Panama will remain on the FATF list for the time being and FATF has 'strongly urged' them to swiftly complete their action plans by June 2023. It has recommended that Panama works on adequate verification of and access to up-to-date beneficial ownership information. The Cayman Islands must demonstrate its prosecutions of AML cases are resulting in the application of 'dissuasive, effective, and proportionate sanctions'.
FATF has also placed Nigeria under increased monitoring and removed Cambodia and Morocco from the list.
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