The final part of the General Laws (Anti-Money Laundering and Combating Terrorism Financing) Amendment Act is due to commence in the early months of 2023.
The General Laws (AML/CTF) bill proposed a sweeping range of integrated reforms to five pieces of legislation which regulated vastly different areas of concern – trusts; non-profit organisations; companies; and matters concerning the Financial Intelligence Centre. Legislation to be amended included the Trust Property Control Act; the Non-profit Organisations Act; the Financial Intelligence Centre Act, the Companies Act, and the Financial Sector Regulation Act.
President Cyril Ramaphosa signed the bill into law on 22 December 2022, which signing was gazetted on 29 December. Two days later the first sections took effect – they are sections 9, 10, 16, 18 to 55, 59, and 62 to 65, and the Gazette 47805 of 31 December 2022 carries the notice of enforcement.
For the most part, the remainder of the act will commence on 1 April 2023 – this pertains to sections 1 to 6, 8, 11 to 15, 17, 56 to 58, 60, and 61, again as detailed in Gazette 47805. Two amendments to the Trust Property Control Act, part of sections 2 and 6 respectively, will not take effect at this time.
Addressing strategic deficiencies
Finance minister Enoch Godongwana tabled the General Laws (AML/CTF) Amendment Bill in Parliament in August 2022, submitting it to the Standing Committee on Finance and the Select Committee on Finance.
Cabinet had approved the tabling of the bill in Parliament at its meeting of 17 August 2022.
The bill was developed in response to the threat of South Africa finding itself on the Financial Action Task Force’s (FATF) grey list of countries under increased monitoring. These are the countries which have been found to have strategic deficiencies in their regimes to counter money laundering, terrorist financing, and proliferation financing, and are actively working with FATF to address these shortcomings.
In a FATF mutual evaluation conducted in the second half of 2021, South Africa was found to have “significant shortcomings implementing an effective system, including a failure to pursue serious cases, especially those linked to so-called ‘state capture’.”
The report found that, while South Africa has a solid legal framework to fight money laundering and terrorist and proliferation financing, it was only partially compliant with FATF recommendations 8, 24 and 25, which deal with non-profit organisations, the transparency and beneficial ownership of legal persons, and the transparency and beneficial ownership of legal arrangements, respectively.
“When the FATF places a jurisdiction under increased monitoring, it means the country has committed to resolve swiftly the identified strategic deficiencies within agreed time frames and is subject to increased monitoring,” said FATF.
South Africa was to take remedial steps within 18 months to address the deficiencies identified. The General Laws (AML/CTF) Amendment Bill – prepared in a matter of months – was the result.
South Africa will know, after the FATF holds its first plenary of the year next month, if its efforts were good enough to avoid an unwelcome debut on the grey list.
However, there is widespread concern that the bill was rushed, and that because of this, it is not as effective as it could be.
In a comprehensive joint submission to Parliament’s Standing Committee on Finance, non-profit organisations Corruption Watch and amaBhungane (amaB) expressed concern that the haste with which the General Laws (AML/CTF) Amendment Bill was developed may have compromised its effectiveness.
The organisations appreciated the importance of responding swiftly and comprehensively to the FATF report, but were concerned at the impact this haste has had on the content of the bill and on the short time frame for public participation. They further expressed disappointment that “the Ministry of Finance, Parliament and the public have not been given the time to grapple fully with these issues”.
“Our concern went further than the content of the bill,” wrote amaB’s Caroline James. “Through our engagement with the drafting process it became clear that the process itself demonstrates the worrying extent of our country’s dysfunction.”
Grey-listing is not a desired outcome, added James. “But neither is the introduction of laws which do not create strong, resilient and transparent financial crime-fighting regimes.”