As part of South Africa’s push to get off the FATF grey list, it has proposed new AML obligations for companies, including increased beneficial ownership reporting, and new regulatory enforcement powers.
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The South African Treasury published a draft anti-money laundering (AML) and counter-terrorism financing (CTF) amendment bill in December 2024, which would, if enacted, introduce stricter compliance requirements on companies and grant regulators greater enforcement powers.
A variety of individuals and entities are subject to existing South African AML laws, including lawyers, real estate agents, financial institutions (FIs), and crypto platforms.
The bill was open for public comment until 6 February 2025. The Treasury is currently engaging with stakeholders before it presents the bill to cabinet and sends it to parliament.
The draft bill includes amendments to four existing pieces of legislation: the Financial Intelligence Centre Act 2001 (FICA), the Companies Act 2008, the Financial Sector Regulation Act 2017 (FSRA), and the Nonprofit Organisations Act 1997 (NPO Act).
The Financial Action Taskforce (FATF) added South Africa to its grey list in February 2023 due to apparent critical weaknesses in the country’s ability to combat money laundering and terrorist financing. South Africa aims to get off the grey list in 2025 by enacting this amendment.
Lexology PRO outlines new compliance obligations which could be on the horizon for businesses.
Key compliance obligations for companies
Risk management for new products
If the bill is enacted, companies will need to consider the risk associated with new products and the use of emerging technologies. For FIs, this could include new financial products such as mortgages or crypto assets. These technologies could present increased risks related to money laundering, terrorist financing, or proliferation financing activities.
Business should develop comprehensive risk management strategies that address these potential threats, ensuring that new products and services are thoroughly vetted for compliance risks.
Beneficial ownership
Currently, anyone with more than 5% beneficial ownership of a South African company must file this information to the local Companies and Intellectual Property Commission (CIPC).
Through amendments to the FSRA, the bill would “empower financial sector regulators to obtain information from significant owners or beneficial owners.”
Amendments to the Companies Act will empower the CIPC to deregister a company if it fails to submit a securities or beneficial ownership register annually. The CIPC may “impose an administrative fine in instances where it has issued a compliance notice for failure to submit the securities register or the register of beneficial interest.” This obligation and potential penalties will enhance transparency and accountability, making it easier for authorities to track and monitor ownership structures.
Suspicious transaction reporting
Companies will be required to submit suspicious transaction reports to the South African Financial Intelligence Centre (FIC) within 15 business days of identifying suspicious activities. This prompt reporting helps authorities to quickly investigate and address potential money laundering or terrorist financing activities. By enforcing strict timelines for reporting, the bill aims to improve the effectiveness of South Africa's financial intelligence and regulatory framework.
Additional enforcement powers
The amendments significantly enhance the powers of South Africa’s FIC. If the bill is passed, the authority would have the power to issue real-time compliance directives (failure to comply with directives may result in an administrative fine) and conduct unannounced inspections to ensure adherence to AML and CTF regulations.
Businesses that fail to meet the requirements laid out in the amendments to the Companies Act (including beneficial ownership reporting) could face fines of up to 10 million rand (US$550,000) or 10% of a company’s turnover for repeated non-compliance.
Additionally, under the amendments to the NPO Act, individuals that misrepresent a non-profit organisation could face fines of up to one million rand (US$55,000) or face up to five years in prison for non-compliance.
Amendments to FICA will allow the FIC to share information with the Public Procurement Office, fostering a collective approach to AML efforts and enhancing overall regulatory effectiveness.
Considerations for businesses
Proactive measures to strengthen internal controls and mitigate risks associated with financial crimes remains essential during this transitional period until the bill is enacted. Changes may be made to the bill before it is passed.
Companies should prepare their staff by providing the necessary resources and training on how to identify and report suspicious transactions within the specified deadlines. Implementing new systems to receive internal reports and gathering beneficial ownership information in preparation for these reports will be vital. This ensures that businesses can meet the stringent reporting obligations and avoid potential enforcement action from authorities.
South Africa is on track to be removed from the FATF grey list by October 2025 if it demonstrates sustained progress in developing its AML/CTF programmes. This exit could lead to increased investor confidence and enhanced international financial relationships, which are positive outcomes for businesses operating in South Africa.
By demonstrating a commitment to robust AML/CTF practices, businesses can contribute to improving the country's financial reputation on the global stage.