Treasury beefs up plan to get South Africa off the grey list

National Treasury has opened new draft regulations in a bid to prevent money laundering and the financing of terrorism as the nation tries to get off the Financial Action Task Force’s (FATF’s) greylist.

In February, South Africa was put on the greylist by the FATF for failing to implement effective measures to counteract money laundering and the financing of terrorism.

Despite varying opinions on the severity of the greylisting, the South African Reserve Bank said that it could severely impact the country’s financial system by causing capital and currency outflows and increasing costs for banks.

South Africa has thus introduced several pieces of legislation to get off the greylist, with the National Treasury now opening the Money Laundering and Terrorist Financing Control Regulations for public comment as per the Financial Intelligence Centre Act.

These regulations lay out the requirements for the sharing of information between accountable institutions.

“Those involved in money laundering and other financial crimes usually do not just target one business. Frequently they deliberately open and maintain many accounts at different institutions,” the regulations state.

“Without information sharing, it is difficult for accountable institutions to recognise whether transactions are part of an economic crime because institutions cannot connect their customers’ transactions within the overall pattern of transactions at other institutions to know if any suspicious activity is occurring.”

“Therefore, the ability to share information is critical to identifying, reporting, and preventing financial crime.”

The Financial Intelligence Centre (FIC) hopes that the improvements in information sharing will help accountable institutions see the full picture when they report unusual transactions to the regulator.

That said, the sharing of customer identities and transaction information between these institutions may lead to privacy concerns.

However, the regulations state that accounting institutions could use advancements in technology, such as encryption, to ensure that personal data is protected when it is shared between organisations.

In addition, when accountable institutions enter into an information-sharing agreement, they must agree on the scope of the information that is shared whilst also ensuring the reliability of the information that they are sending.

“The FIC Act does not require that accountable institutions obtain the FIC’s permission to share customer information with each other,” the draft regulations state.

“However, given the sensitivity of the information that is likely to be shared between accountable institutions when one or more of them is contemplating the reporting of a suspicion to the FIC, and the impact that such a sharing of information may have on the FIC’s operations, it is important that the FIC be made aware of any initiative between accountable institutions to share information in this context.”

Public comments on the new Draft Regulations must be submitted by Sunday, 29 October to [email protected].

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