Members of the Parliament questioned whether the latest anti-money-laundering amendment Bill will tackle financial crime effectively or merely create new compliance obligations for businesses, non-profit organisations, and financial institutions.
Officials from various government departments – including National Treasury, the Financial Intelligence Centre (FIC), and the Financial Sector Conduct Authority – yesterday briefed the National Assembly’s Standing Committee on Finance on the General Laws (Anti-Money Laundering and Combating Terrorism Financing) Amendment Bill.
Read: Latest FATF review puts South Africa under a harsher spotlight
Questions raised during the briefing focused on the growing reach of regulators, including proposed lifestyle-audit powers, dual licensing provisions, and expanded reporting obligations.
MPs pressed officials on whether South Africa’s existing anti-money-laundering framework was delivering results. EFF MP Omphile Maotwe cited allegations involving undeclared foreign currency (Phala Phala) and questioned why institutions often appeared unable or unwilling to provide answers about investigations, asking what practical difference new legislative powers would make if accountability remained elusive.
National Treasury’s Chris Axelson, deputy director‑general for tax and financial sector policy, said a newly gazetted traveller declaration system for cash, due to take effect from 1 July, would help to address undeclared foreign currency entering the country.
ActionSA MP Alan Beasley asked whether the revelations emerging from the Madlanga Commission into police corruption and money laundering could jeopardise South Africa’s position with the Financial Action Task Force (FATF).
Ismail Momoniat, technical adviser to National Treasury, placed the Madlanga Commission within the framework of FATF’s effectiveness assessments, particularly the so‑called Immediate Outcomes dealing with law‑enforcement performance.
“On the question on the impact of the Madlanga Commission […], the hardest Immediate Outcomes or effectiveness measures are sort of IO 7, which is on investigations, prosecutions, and convictions with regard to serious and complex money laundering. There’s one for terror financing as well, IO 9, and IO 8, which is related to asset forfeitures or asset recoveries,” said Momoniat, who helped to steer South Africa’s exit from the FATF grey list last year.
He said the commission’s evidence about senior police officers’ links to organised crime goes directly to South Africa’s ability to meet those tests:
“Those are, I would say, the hardest measures that South Africa will need to deal with, and clearly I think the events at Madlanga, the ability of the country to deal with organised crime, and particularly if many of our top police are implicated in be in their links with organised crime, does impact on their ability to process cases, and if these cases are not completed that will impact on South Africa.”
Momoniat reminded MPs that the FATF assesses countries on a five‑year run of case data, not just on whether laws are in place.
“FATF looks at five years of data, so it wants to know the number of cases, how many of them have been fully investigated, whether we prosecute in such cases, whether they are convictions, and so on. And I think that’s where those measures I think are going to be quite tough for South Africa to deal with.”
He described enforcement against financial crime as one of the state’s most serious weaknesses.
“It’s not a secret that I think that’s the area of law enforcement I think is one of our biggest challenges, particularly as they relate to financial crimes.”
At the same time, Momoniat cast the combination of the recent greylisting episode and the current mutual evaluation as an opportunity to address those weaknesses rather than only as a threat.
“So, in a sense, I think both the greylisting and the coming mutual evaluation does pose a challenge, an opportunity for us to fix up our system and to make sure that we do better against financial crimes.”
Dual licensing
DA MP Dr Mark Burke questioned whether clauses allowing for dual licensing under the Financial Sector Regulation Act (FSRA) and other sectoral laws could leave emerging firms mired in months-long approval processes. Separately, DA MP Wendy Alexander raised concerns about the broader compliance burden facing smaller entities and the scope of some of the Bill’s new regulatory powers.
Burke pointed to clauses 37 and 38 of the Amendment Bill, which enable regulators, via standards, to require financial institutions to obtain licences under both the FSRA and statutes such as the National Credit Act or the National Payment System Act, and asked whether this could create another layer of licensing for businesses already subject to lengthy authorisation processes.
Retha Stander, a senior legislation manager at the FSCA, said dual licensing “would not happen automatically”. It would only arise once a standard has been made under the FSRA. Any such standard would have to strike a “careful balance” between achieving regulators’ statutory objectives and the regulatory burden on smaller entities.
To address concerns about duplication, the FSCA pointed to existing co-ordination mechanisms in the FSRA, including co-operation between the FSCA, the South African Reserve Bank, and other regulators such as the National Credit Regulator. Through memoranda of understanding and streamlined licensing processes, regulators can avoid requiring firms to “provide all the information again” for a second licence, Stander said.
Later during the briefing, Axelson said Treasury is open to reviewing compliance burdens where industry demonstrates they are disproportionate.
FIC lifestyle audits as an additional tool
Burke also questioned whether proposed lifestyle‑audit powers for the Financial Intelligence Centre (FIC) would simply duplicate the work of the South African Revenue Service, which already conducts lifestyle audits for tax purposes.
He asked whether it made sense to have “multiple” lifestyle-audit units across the state, rather than channelling this work through SARS. Alexander raised a related concern, asking what would trigger such audits and what safeguards would exist against abuse, given what she described as broad wording in the Bill.
Poovindree Naidoo, the chief legal and policy adviser at the FIC, said the new provisions are not intended to take away any existing lifestyle‑audit powers from SARS or other entities. Instead, they would give the FIC an additional tool to fulfil its mandate of “following the money”, based on the financial‑intelligence information it already holds under the Financial Intelligence Centre Act.
The FIC drew a distinction between:
- SARS lifestyle audits, which focus on unexplained income and determining tax liabilities, and
- FIC lifestyle audits, which would support the FIC’s mandate of following the money and using the financial intelligence it already holds.
The FIC said the powers would apply to categories of persons identified in the legislation and could also be exercised at the request of organs of state, public entities, and municipalities.
Addressing Alexander’s concerns about the Protection of Personal Information Act, Naidoo said the amended information‑sharing provisions are designed to operate within POPIA, or, where specific exclusions apply, under equivalent safeguards. New recipient institutions, such as the Public Procurement Office, will be required to appoint an authorised officer through whom FIC information is channelled, with internal processes to protect confidentiality and govern use.
Axelson added that SARS is bound by secrecy provisions in its own legislation and cannot share lifestyle‑audit information with other bodies. SARS focuses on taxable income, he said, while the FIC’s proposed powers relate to illicit income. Removing SARS’s secrecy constraints would require legislative change.
Global FATF standards
Beasley and ANC MP Seaparo Sekoati questioned whether South Africa is being held to stricter standards than other jurisdictions, and whether the Bill’s measures would be calibrated to the risk profile of smaller entities and to the realities of developing countries in the region.
Axelson told the committee that the FATF recommendations are global standards applied uniformly. Although South Africa is the only African core member of the FATF, almost all African countries are assessed under regional bodies such as the Eastern and Southern African Anti‑Money Laundering Group (ESAAMLG). At any given time, about 20 countries are grey-listed globally, about half of them African, he said.
He and Momoniat both noted that South Africa and other states have pushed the FATF to adopt a more developmental approach that recognises the capacity constraints of low‑income and developing economies. Momoniat said the FATF has taken some steps in that direction.
On the design of domestic obligations, Axelson emphasised that South Africa’s framework is risk‑based. Higher‑risk activities and entities are subject to more intensive obligations. Lower‑risk entities should face lighter compliance expectations, even where they are classified as accountable institutions.
He said Treasury had issued the Bill for public comment twice, with the most recent round at the beginning of the year, and had received extensive submissions from industry, including on compliance costs. Treasury was “happy to discuss that again” through Parliament’s public‑participation process, he added.
On concerns raised by MPs about secrecy at the FIC and the lack of public visibility of investigations, Axelson said the FIC is legally prohibited from disclosing the existence, status, or details of specific investigations to anyone other than law‑enforcement agencies and the National Prosecuting Authority. National Treasury itself does not receive that information, he said; responsibility for prosecutions and public accountability rests with law‑enforcement agencies, not with the FIC.
Beneficial ownership disclosure
MPs asked questions about beneficial ownership (BO) disclosure, particularly in the context of close corporations and small companies that already face extensive paperwork.
Companies and Intellectual Property Commission (CIPC) senior legal adviser Lucinda Steenkamp told the committee that the CIPC has introduced an “optimised filing” process for BO declarations. Under this system, beneficial‑ownership information is filed online, and relevant corporate data is pre‑populated from CIPC’s existing records, with the aim of simplifying the process for smaller entities.
Regarding sanctions, Steenkamp said the new powers to impose administrative fines for non‑compliance are intended as a deterrent to drive compliance, rather than a blanket punitive measure.
She said enforcement is not one‑size‑fits‑all. The Companies Act sets out factors CIPC must consider, including the nature, duration, and gravity of a contravention, and any loss or damage suffered as a result.
In practice, Steenkamp said, the CIPC follows a graduated process:
- Compliance notices and engagement with the entity, and
- Administrative fines only where there is continued non‑compliance after these steps.
This applies across the companies and other CIPC-regulated entities covered by these provisions, with sanctions calibrated to the circumstances of each case.
Targeted, risk-based supervision of NPOs
MPs raised concerns about the impact of the Bill on non‑profit organisations (NPOs), asking whether small, community‑level entities – such as a church feeding scheme with a modest budget – would be subjected to the same record‑keeping and sanction regime as large international NGOs moving funds across borders.
Mpho Mngxitama, acting deputy director-general for community development at the Department of Social Development (DSD), said the department had conducted a compliance impact assessment in 2018. That work found that much of the burden on NPOs arose from a lack of integration among regulators, rather than from FATF requirements alone.
Mngxitama said the DSD is now implementing a “targeted risk‑based approach” for NPO oversight, in line with FATF guidance. This involves:
- Analysing registered NPOs using a defined risk‑assessment methodology and indicators,
- Identifying which NPOs are at elevated risk of abuse for terror financing, and
- Recognising that “not all NPOs are at risk” and should not be treated as such.
For NPOs identified as higher risk, DSD intends first to:
- Inform them of their risk status,
- Assist them to put governance and protective measures in place, and
- Maintain ongoing engagement and awareness‑
Sanctions would be reserved for repeated non‑compliance, and even then, would generally follow administrative steps rather than being imposed at the outset.
The DSD also cited the FATF’s position that countries should not disrupt legitimate NPO activity or impose blanket measures that undermine civil‑society work.
