THE Financial Intelligence Centre (FIC) has made notable advancement in its attempts to fight financial crime, according to its 2023/24 annual report, which outlined the institution’s expansion of control to non-financial industries, which enhanced oversight and contributed to recovering more than R98.5 million in criminal proceeds this year.
South Africa responded to being greylisted by the Financial Action Task Force (FATF) in February 2023 by stepping up monitoring. “We urgently implemented reforms to address deficiencies and strengthen our AML and CFT frameworks,” acting director Pieter Smit said, adding that 2023 was a “pivotal” year.
The FIC currently keeps an eye on approved non-financial companies and professions such as casinos, legal firms, estate brokers, and dealers in precious metals and stones. “It allows us to build a more comprehensive approach to preventing financial crime,” Smit said underlining the need to venture into these industries.
The company registered 51 020 institutions and handled 7.4 million regulatory reports, including around 415 000 suspicious transaction reports. These investigations turned to the blocking of R295.8 million connected to alleged illicit activity across 208 bank accounts.
The FIC developed a risk and compliance analysis tool to improve supervision, which calls for DNFBPs to answer a self-assessment form. This instrument enables companies to spot weaknesses in money laundering and terrorist funding policies. “The self-assessment marks a revolution,” Smit said.
He further said it helps organisations to more precisely recognise and reduce their risks. The information gathered guided 111 risk-based audits of high-risk companies.
The establishment of the Shared Forensic Capability (SFC) in May 2023, therefore giving law enforcement forensic assistance, marks still another turning point for the FIC. “Building strong cases depends on forensic analysis,” Smit said, noting that the SFC had handled 18 cases in its first year and provided vital forensic findings and affidavits to support prosecutions.
The FIC also carried out 558 inspections, finding non-compliance in 245 institutions that called for corrective action. “We absolutely need our inspections to guarantee responsibility,” Smit said. “Institutions have to realise how important compliance is for protecting our financial system.”
With almost twice the attendance from the year before, the FIC organised 48 awareness and instructional events to encourage a culture of compliance. “Although the road ahead is difficult, we are making major progress towards making sure every industry can fight financial crime,” Smit said. “Key is cooperation; we are dedicated to engage all interested parties.”
The increased FIC supervision of non-financial sectors will be crucial as South Africa strives to leave the FATF grey list by February 2025. The FIC wants to improve its capacity and strengthen the whole financial system against money laundering and terrorism funding by including several sectors into its regulatory framework.
FATF’s greylisting of the country’s anti-money laundering (AML) and counter-terrorism financing (CFT) systems revealed serious flaws in both. Investors and financial institutions were alarmed by this classification, which led to immediate demands for change.
Regulators and foreign partners are expected to be under more scrutiny; many institutions will have more compliance needs. Furthermore resulting from the greylisting could be a loss of foreign direct investment since worldwide investors could consider the classification as a sign of systematic risk.
The ruling of FATF exposed substantial flaws in the country’s financial systems, mostly related to insufficient compliance structures. Many financial institutions and organisations have battled to put sensible AML/CFT policies into practice, therefore leaving gaps in the identification and documentation of dubious behaviour.
Coordinated actions among financial institutions, authorities, and the government will be vital in rebuilding confidence and ensuring South Africa’s removal from the grey list as it negotiates these difficulties.
Financial institutions have been advised to improve their AML/CFT systems, make technology investments for real-time transaction monitoring, and encourage compliance culture.
According to the FIC, maintaining adherence to AML/CFT rules depended mostly on continuous staff education and development. For South Africa’s financial institutions, the greylisting represents a turning point that highlights how urgently reform in AML/CFT policies is needed.
sizwe.dlamini@inl.co.za