SA pushing a united approach to fight financial crimes
Fighting financial crime in South Africa needs commitment and deliberate efforts by regulators and other role-players, including law enforcement agencies. This has been the dominant message in the wake of the recent grey-listing of South Africa by the Financial Action Task Force (FATF), an intergovernmental initiative that develops global policies against money laundering, financing terrorism
SA pushing a united approach to fight financial crimes
This has been the dominant message in the wake of the recent grey-listing of South Africa by the Financial Action Task Force (FATF), an intergovernmental initiative that develops global policies against money laundering, financing terrorism and weapons of mass destruction. FATF placed South Africa on its grey list with an eight-point corrective action plan that should be implemented by no later than the end of January 2025.
Even with these urgent areas of action, it’s important to note that FATF has acknowledged the significant progress made by SA on many of the Mutual Evaluation Report (MER’s) recommended actions to improve its systems, including by developing national Anti-Money Laundering and Counter-Terrorism Financing (AML/CFT) policies.
Work to ensure a synchronised and more agile response to the areas of concern has been underway long before the FATF plenary late in February. Recently, the Financial Services Conduct Authority (FSCA) brought together senior representatives from various law enforcement agencies, the prosecuting authority, regulators, professional bodies, academia, and the financial services industry for its 2nd South African Financial Crime Symposium, to engage openly and honestly about the challenges of combating financial crime in SA, and to actively seek solutions.
The Symposium, hosted in partnership with the North-West University’s Business School, was supported by important financial industry organisations such as the Banking Association of South Africa (BASA); the Insurance Crime Bureau (ICB) and the South African Insurance Association (SAIA). FATF’s mutual evaluation report on South Africa notes that more than half of the crimes reported in SA generate financial proceeds. These include tax crimes (e.g. tax evasion), corruption, ponzi and pyramid schemes, fraud, and digital banking fraud.
A collaborative effort is necessary as these financial crimes in turn facilitate the perpetration of organised crimes such as human-, drugs- and wildlife trafficking, and terrorist financing. These are areas of great concern not only for authorities, but also for the broader South African public who want stern action to combating these growing crimes in their communities. Therefore, a collaborative effort by the various stakeholders in fighting financial crimes is not only aimed at appeasing FATF, but also gives the population a sense of security on their streets.
SA will take some lessons from Mauritius in complying with FATF’s demands. The Indian Ocean island state was grey listed in February 2020 but managed to get off the list 20 months later. Several other African countries have succeeded in getting off the grey list.
It is good to note that there are no items on the action plan that relate directly to preventive measures in respect to the financial sector. This reflects the significant progress in the application of a risk-based approach to customer due diligence of the sector.
The FSCA is the market conduct regulator of financial institutions in SA. As such, it plays a vital role in safeguarding the integrity of, and preserving public trust in, SA’s highly interconnected financial system.
Since the Mutual Evaluation Reports of 2021, the FSCA has worked closely with other key stakeholders, including the South African Reserve Bank (SARB), Financial Intelligence Centre (FIC) and the National Treasury, to strengthen its oversight of anti-money laundering and counter-terrorism financing risks in the financial sector.
These coordinated and substantial efforts, led by the National Treasury, have resulted in many of the key deficiencies relating to the supervision and prevention of certain risks in the financial sector being addressed in a relatively short period of time.
The FSCA remains committed to its supervisory efforts to combat money laundering and terrorist financing and to dissuade criminals who aim to misuse SA’s financial system for nefarious purposes. The Authority will continue to work closely with the Interdepartmental Committee on AML/CFT led by National Treasury to strengthen SA’s fight against financial crime.
As a critical financial and economic hub in the southern Africa region, SA is not only exposed to domestic crime, but has a notable exposure to international criminal networks that launder criminal proceeds in or through the country. This is often done through the abuse of South African citizens and legal entities. This is a challenge that all role players have committed to address.
Another key discussion point at the symposium was the shortcomings highlighted by the Commission of Inquiry into State Capture (Zondo Commission). Crucial discussions included the need for significant reform in SA’s governance and anti-corruption institutions, as well as greater transparency and accountability in government and business practices.
An important consensus was achieved in that the stakeholders agreed to enhance collaboration; the sharing of data; and strengthening one another’s efforts in the fight against financial crimes, to prevent the loss of billions of rand lost to crime each year in the country. These commitments are an important step towards the speedy identification, investigation and prosecution of financial crimes.
(Jointly written by the FSCA and the Unit for Corruption and Integrity Studies of the North-West University (NWU) Business School.)
