A Guide for South African Businesses on Anti-Money Laundering Legislation

Mar 22, 2024 | News

In response to its 2023 “grey listing” by the Financial Action Task Force (FATC), the enactment of The General Laws (Anti-Money Laundering and Combating Terrorism Financing) Amendment Act 22 of 2022 marks an important shift in South Africa’s approach to combating these nefarious financial activities.

For directors and senior management of Accountable Institutions—ranging from banks and attorneys to estate agents and financial service providers—the stakes have never been higher. The amendments underscore a transition from a rules-based to a risk-based approach in customer due diligence. This paradigm shift demands a proactive engagement in identifying and mitigating the risks of money laundering and terrorism financing.

The cornerstone of these amendments is the obligation to develop, maintain, and implement a Risk Management and Compliance Program (RMCP). This isn’t merely a policy document but a comprehensive strategy to assess, monitor, and mitigate financial crime risks associated with your business operations. It mandates a deeper understanding of your clients through enhanced due diligence, ensuring that your institution isn’t unwittingly facilitating financial crimes.

Implications for your Business

Failure to comply with these directives carries significant repercussions. Directors can face administrative sanctions ranging from warnings to fines up to R10 million for individuals and R50 million for legal entities. Beyond financial penalties, non-compliance could tarnish your institution’s reputation, deter potential investment, and hinder your ability to operate effectively.

Practical Steps

  1. Embrace the Risk-Based Approach: Evaluate your current client due diligence processes. Are they sufficiently robust to identify the risks of money laundering and terrorism financing? Adjust your strategies to not just meet but exceed the statutory requirements.
  2. Invest in Training: Your employees are your first line of defence. Ensure they are well-trained to recognise and report suspicious activities. This includes understanding the nuances of the new legislation and the practical aspects of implementing your RMCP.
  3. Leverage Technology: Utilise advanced technologies to streamline your compliance processes. Automated systems can help in efficiently conducting due diligence, monitoring transactions, and maintaining records.
  4. Stay Informed: The regulatory environment is always evolving. Keep abreast of any further amendments or guidelines issued by regulatory bodies. This will ensure your compliance strategies remain current and effective.
  5. Collaborate with Legal Experts: Engage with legal experts to gain insights and understand the challenges for your organisation.

The amendments to FICA, through The General Laws (Anti-Money Laundering and Combating Terrorism Financing) Amendment Act 22 of 2022, are not just regulatory hurdles but opportunities for businesses to strengthen their operational integrity and contribute to the global fight against financial crimes.

By taking a proactive stance and embracing these changes, business leaders can safeguard their institutions against the risks of money laundering and terrorism financing, ensuring sustainable growth and fostering a secure economic environment for South Africa.

Jodi Poswelletski | Corporate Director & Jannes van der Berg | Candidate Attorney