The past few months have seen a wide variety of important amendments occurring within the Anti-Money Laundering and Combating Terrorism Financing (AML/CFT) space as part of South Africa’s continued legal fight against potential "greylisting".
These changes began with the amendment of the Financial Intelligence Centre Act (FICA) Cash Threshold Reporting requirements, followed by the inclusion of several further Accountable Institutions (AIs) under Schedule 1 of the FIC Act and most recently the enactment of the General Laws (Anti-Money Laundering and Combating Terrorism Financing Amendment Act) (the Act).
Below is a table of the more important FICA specific amendments with their respective effective dates and a more detailed explanation which follows:
| FICA Amendment | Effective Date |
| Cash Threshold Reporting amount and reporting period (read more) | 14 November 2022 |
| New Accountable Institutions (read more) | 19 December 2022 |
| DPIPs/FPPOs to DPEPs/FPEPs and including new category of PIPs (read more) | 29 December 2022 |
| Proliferation Financing (PF) inclusion (see below) | 29 December 2022 |
| Discontinuing Customer Due Diligence (CDD) and reporting when suspicion arises (see below) | 29 December 2022 |
| Administrative sanctions for an AI structuring transactions to avoid reporting (read more) | 29 December 2022 |
The Act is a key legal mechanism aimed at addressing the deficiencies identified by the FATF in its Mutual Evaluation Report and observation period of South Africa’s AML/CFT landscape. It was enacted by the President at the end of December 2022, with some sections being effective from 29 December 2022 and others from 1 April 2023, as mentioned above.
It would be prudent for AIs to strike while the iron is hot and aim to comply with the amendments as soon as possible as it is highly likely that the Financial Intelligence Centre (FIC) will be even more active with its inspections during 2023, given that one of the key FATF findings was not so much in the adequacy of South Africa’s AML/CFT laws, but rather that these laws are not adhered to nor practically implemented by the various investigative and prosecutorial authorities.
The Act amends the below 5 pieces of legislation, being incorporated into one holistic, omnibus Act:
- FICA
- the Trust Property Control Act (TPCA)
- the Nonprofit Organisations Act (NOA)
- the Companies Act (CA)
- the Financial Sector Regulation Act (FSRA)
A common theme among the amendments is an emphasis on Beneficial Ownership (BO) and control structures of companies and trusts, highlighting the importance of identifying and verifying these individuals as a key step in combating ML/TF risks. An Ultimate Beneficial Owner (UBO) is effectively the natural person or “warm body” who can ultimately control, or has ultimate benefit from, an entity and its operations and is typically the person who holds in excess of 5% shareholding of an entity.
For example, in terms of the TPCA, the Masters of the various provincial divisions of the High Courts are required to maintain a register containing information relating to beneficial ownership of trusts, and providing for access to information regarding beneficial ownership. The Master, amongst other functions, is the supervisory authority in relation to trusts and trust administration.
In addition, each founder, trustee and beneficiary of a trust is considered a UBO. For transparency and identification purposes, a trustee must disclose its position as such when engaging with an AI in its capacity as trustee and ensure that the AI is aware that the transaction or business relationship relates to trust property.
Trustees are also now required to establish and record the beneficial ownership of the trust and keep such records for purposes of lodging the above-mentioned register with the Master’s Office.
In a similar vein, the NOA requires registered nonprofit organisations to submit prescribed information about the office-bearers, control structures, governance, management, administration and operations of nonprofit organisations to the Director of Nonprofit Organisations, within the Department of Social Development, and which requires the Director to keep a registry of such information in this regard.
"Proliferation Financing” and “Proliferation Financing Activity” has also been prioritised in the Act and a definition has been created, relating to an activity which has or is likely to have the effect of providing property, a financial service or economic support to a non-State actor, that may be used to finance the manufacture, acquisition, possessing, development, transport, transfer or use of nuclear, chemical or biological weapons and their means of delivery. In terms of an AI’s Risk Management Compliance Programme (RMCP), provision must be made for the proliferation financing risks to which its existing and new products and services are exposed.
One of the bigger changes in terms of CDD and reporting is that if an AI suspects that a transaction or activity is suspicious or unusual, and the institution reasonably believes that performing the CDD requirements will disclose to the client that a report will be made in terms of section 29 (a tipping-off risk), it may discontinue the CDD process and consider making such report. If an AI structures a transaction to avoid its reporting duties, this will now be a new offence under the amendments.
As always we aim to keep you updated with all the latest information regarding FICA and SA’s greylisting. Please note that our software and services are updated according to all the changes.
Please feel free to reach out to our compliance team for any questions or concerns: compliance@docfox.co.za