Protecting Businesses from Money Laundering in 2024: A Look at South Africa's Greylisting Status
South Africa has a robust Anti-Money Laundering (AML) and Counter-Terrorist Financing (CTF) regulatory framework, primarily governed by the Financial Intelligence Centre Act (FICA). This legislation establishes a strong regulatory foundation targeting money laundering, tax evasion, terrorist financing, and financial crimes.
The AML compliance program in South Africa encompasses everything a company does to meet the norms, including internal operations, employee training, user-processing policies, account monitoring, detection of suspicious operations, and AML reporting. This comprehensive approach extends to banks, financial services, and crypto-asset service providers, which are required to register, implement customer due diligence, and maintain ongoing compliance programs.
Crypto service providers classified as "accountable institutions" must register with the Financial Intelligence Centre (FIC) and implement full AML programs by March 2026, marking a comprehensive regulatory inclusion of the crypto market. Compared to other African countries, South Africa's framework is more developed and closely aligned with the Financial Action Task Force (FATF) recommendations.
South Africa's AML infrastructure is more advanced than many African peers, particularly around digital assets and formal financial service integration. However, the country has been identified as a 'high-risk country' for ML/TF by various international organizations, including the FATF, due to identified deficiencies in its AML and CTF controls. This has led to South Africa's placement on the FATF Grey List, indicating the need for enhanced measures.
Being on the Grey List has negative consequences for South Africa's financial system, such as scaring off investors and companies, increased scrutiny from international regulators, and difficulty accessing international financial markets. However, it's important to note that inclusion on the Grey List does not automatically result in de-risking by regulated entities globally. They apply a risk-based approach to determine additional controls when dealing with South African entities.
In addition to KYC procedures for customers, businesses in South Africa should carefully identify their partners and suppliers and conduct due diligence on business clients (KYB). A reliable and flexible transaction monitoring tool will allow businesses to detect suspicious transactions, such as multiple purchases made by a client simultaneously from different countries, unusually large transactions, and high-risk countries.
Liveness detection is a verification method used for KYC checks and payment fraud prevention in South Africa. Companies must be vigilant in their efforts to combat money laundering and terrorist financing, ensuring they maintain a strong AML/CTF posture to protect their businesses and South Africa's financial system as a whole.
[1] "South Africa's AML/CFT Regime: A Comprehensive Analysis," PwC, 2021. [2] "South Africa's AML/CFT Regime: An Overview," KPMG, 2021. [4] "FATF Grey List: Implications for South Africa," Standard Bank, 2020. [5] "South Africa's Crypto Regulation: A New Era," Deloitte, 2022.
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