From Business Tech

Massive changes on the cards for South Africa’s finance laws as greylisting draws near

Minister of Finance Enoch Godongwana has published an explanatory note on the General Laws (Anti-Money Laundering and Combating Terrorism Financing) Amendment Bill, which he aims to introduce to the National Assembly in the third quarter of 2022.

The bill makes amendments to four key financial acts, changing wording and responsibilities to better secure South Africa’s financial systems from money laundering and terrorism financing.

These issues have come under the spotlight in the country following threats that it would be ‘greylisted’, and follows warnings from the South African Reserve Bank’s Prudential Authority that the country’s banks are at high risk of being used for money laundering and terrorism funding.

A recent report from the Financial Action Task Force (FATF), an international watchdog, identified significant weaknesses in parts of South Africa’s financial regulations which have resulted in high cases of money laundering and terrorism funding in the country.

If no significant changes are made to legislation, the country could be greylisted – meaning it would be deemed a high-risk jurisdiction to transact with, and conducting business with South Africa would require additional steps.

Government has until October to demonstrate that it has a credible plan to address its deficiencies – failing to do so would result in the country being greylisted in February of next year.

The Prudential Authority, meanwhile, recently published a banking sector review, which found that the country’s biggest banks were at high risk of being used for nefarious purposes by external and internal parties.

According to Godongwana’s explanatory note, the changes put forward by the General Laws (Anti-Money Laundering and Combating Terrorism Financing) Amendment Bill will go on to address many of these concerns. The bill aims to make changes to the following laws:

Trust Property Control Act, 1988

Inserting definitions of “accountable institution and “beneficial owner”;

Imposing certain requirements on trustees;

Specifying matters that would disqualify a person from being appointed or continuing to act as a trustee;

Providing for the removal of a trustee who becomes disqualified to continue to act as a trustee;

Specifying information that must be kept by trustees in relation to beneficial owners in relation to trusts;

Requiring the Master to maintain a register containing information relating to beneficial ownership of trusts, and providing for access to information regarding beneficial ownership; and

Specifying certain offences.

Nonprofit Organisations Act, 1997

Requiring registration in terms of the Act;

Enabling the Nonprofit Organisations Directorate, in order to perform its functions, to collaborate, co-operate, co- ordinate and enter into arrangements with other organs of state;

Requiring nonprofit organisations to submit prescribed information about the office-bearers, control structure, governance, management, administration, and operations of nonprofit organisations to the director;

Require prescribed information relating to the office-bearers, control structure, governance, management, administration, and operations of nonprofit organisations to be included in the register that the director must keep, and by providing for access to that information;

Providing for grounds for disqualification for a person to be appointed or continuing to act as an office-bearer of a nonprofit organization;

Providing for the removal of an office-bearer; and

Specifying certain offices.

Financial Intelligence Centre Act, 2001

Amending the definitions of “beneficial owner”, “domestic prominent influential person” and “foreign prominent public official”, and inserting a definition of “prominent influential person”;

Amending the objectives of the Financial Intelligence Centre (“Centre”);

Amending the functions of the Centre to include the provision of forensic information; by empowering the Centre to request information held by other organs of state;

Providing for additional and ongoing due diligence measures, and by amending the process followed when there are doubts about the veracity of information;

Aligning certain provisions and Schedules 3A and 3B to appropriately refer to domestic and foreign “politically exposed persons”, as distinct from “politically influential persons”, who will dealt with in a new Schedule 3C;

Amending certain provisions relating to resolutions of the Security Council of the United Nations; by amending the powers of access by authorised representatives to records of accountable institutions;

Enabling the Centre to renew a direction not to proceed with a transaction; by providing for the safeguarding of information;

Amending the provisions relating to the disclosure of information to the Centre and access to information by the Centre;

Empowering Minister to prescribe appropriate requirements relating to the access to personal information to ensure that adequate safeguards are in place as required by section 6(1)(c) of the Protection of Personal Information Act, 2013;

Amending certain provisions relating to the risk management and compliance programme; by amending the offences provisions to empower the imposition of an administrative sanctions;

Amending the provision relating to the amendment by the Minister of Schedule 2; and

Amending Schedules 2, 3A and 3B, and by inserting a new Schedule 3C.

Companies Act, 2008

Inserting a definition of “beneficial owner”; by providing for a comprehensive mechanism through which the Commission can keep accurate and updated beneficial ownership information;

Requiring a company to keep a record of a natural person who owns or controls the company in terms of the definition of “beneficial owner”, and by providing for specified timelines within which the company must record any changes in this information;

Requiring a company to file a record of any natural person who owns or controls the company in terms the definition of “beneficial owner”, with the Commission; and

Specifying that persons who are convicted of offences relating to money laundering, terrorist financing, or proliferation financing activities are prohibited from registering as company directors.

Financial Sector Regulation Act, 2017

Providing that a financial institution, key person, representative or contractor to which a regulator’s directive in terms of Part 2 of Chapter 10 has been issued must comply with the directive;

Inserting a new Chapter dealing with beneficial owners into the Act, which provides a definition of “beneficial owner”, and empowers standards and regulator’s directives to be made in relation to beneficial owners.

Notably, some of the changes have already been met with resistance. Specifically, businesses have hit back at some of the proposed changes for the Financial Intelligence Centre Act, saying that the proposals would add costly administrative burdens on businesses that are not at risk of being part of the problem.

The proposed amendments were said to be a blunt instrument in a broad kneejerk reaction to the possible ‘greylisting’ and sufficient thought has not been given to the impact such regulations could have on business in the country