The Draft General Laws (Anti-Money Laundering and Combating Terrorism Financing) Amendment Bill forms part of South Africa’s ongoing efforts to strengthen the effectiveness and sustainability of its AML/CFT regime ahead of the upcoming mutual evaluation by the Financial Action Task Force (FATF).
Read: Draft AML/CFT amendment Bill tightens regulatory net
The Bill proposes amendments to four statutes central to South Africa’s AML/CFT framework: the Nonprofit Organisations Act, the Financial Intelligence Centre Act (FICA), the Companies Act and the Financial Sector Regulation Act (FSRA).
Across all four Acts, Moonstone Compliance believes the Bill is largely clarifies and strengthens existing AML/CFT expectations rather than introduces a fundamentally new regulatory philosophy.
The practical effect of the Bill lies in greater enforceability, clearer statutory wording, and increased regulatory agility.
Central issue for FSPs: FSRA amendments
For financial services providers, the proposed amendments to the FSRA are the most significant aspect of the Bill. These amendments are directed at how regulators respond to evolving financial activities, particularly where those activities resemble regulated financial products in substance but fall outside existing licensing frameworks in form.
The Bill proposes amendments to the definitions of “financial investment” and “financial service” in the FSRA. In particular, it expands the scope of regulated activity to include arrangements that are similar in nature or outcome to existing financial products, regardless of the technology used.
The focus is not on how a transaction is structured but on whether its economic effect is that participants are placing funds with an expectation of return. Where that is the case, regulators are empowered to treat the activity as falling within the regulatory perimeter, even if it does not neatly fit existing product definitions. Importantly, the amendments are aimed at activities conducted as part of a business, not at isolated or incidental transactions.
Power to require licensing for specific activities
A central feature of the FSRA amendments is the power granted to regulators to require a licence for a specific activity, even where the entity is already licensed under another Act. This mechanism is often misunderstood as an expansion of product regulation, but this is not its purpose, says Billy Seyffert, Moonstone Compliance’s chief operating officer.
“This is not about expanding the definition of financial products under FAIS. It’s about bringing certain activities into the AML sphere,” he says.
In practical terms, this allows regulators such as the FSCA or the Prudential Authority to determine that a particular activity should be licensed and therefore subject to AML/CFT obligations where that activity would otherwise fall outside FICA’s scope. This approach addresses a long-standing regulatory challenge: financial innovation and new distribution models evolve far more quickly than primary legislation can be amended.
“Financial products and the way they’re distributed evolve much faster than legislation,” Seyffert explains. “This allows regulators to react without having to go through the entire parliamentary process every time.”
It is unlikely that the FSRA amendments will have immediate consequences under the current FAIS regime. Seyffert says the amendments are better understood in the context of the future Conduct of Financial Institutions (COFI) framework, which is based on activity-based licensing.
“I don’t see this provision being used while FAIS is the prevailing legislation. This is a gap-closing exercise for a COFI environment.”
The FSRA amendments are most relevant to firms operating in areas such as platform investments, private credit, and technology-enabled financing structures. These are environments where funds are raised, pooled or deployed in ways that may resemble traditional investments, even if they are structured through special purpose vehicles, novel contractual arrangements, or digital platforms.
Seyffert emphasises that the intent is not to target advisers or traditional financial intermediaries. “This is not trying to regulate the man on the street providing financial services. It’s about strengthening regulators and supervisory capability,” he says.
RMCPs and section 42 of FICA
The Bill proposes amendments to section 42 of FICA, which governs the content of a Risk Management and Compliance Programme (RMCP). The amendment requires institutions explicitly to indicate how new products, services, distribution channels or delivery mechanisms may affect AML risk, and how those risks are addressed within the RMCP.
This requirement is not new in substance. “That wording was already in Guidance Note 7A,” says Marili Orffer, who leads Moonstone Compliance’s legal and regulatory support team.
Seyffert agrees, noting that institutions were already expected to consider and document the risk implications of new distribution channels or technologies. The amendment’s significance lies in the fact that this expectation is now directly enforceable as a statutory obligation.
“Section 42 is where most people fail an on-site inspection. This takes something that was guidance and makes it law,” he says.
From a practical perspective, the amendment requires institutions to record their reasoning – not merely the outcome – when assessing how changes to products or delivery channels may alter risk profiles. The risk-based approach remains intact, but the documentation threshold is higher.
Record-keeping: extending the retention period
A universally applicable amendment to FICA is the extension of record-keeping requirements from five years to seven years for all accountable institutions. This change applies across the Act and affects records relating to customer due diligence, business relationships, and transactions.
Seyffert says its practical impact will vary across sectors. “In financial services, probably not a big change, because institutions generally retain records for a long time.”
Institutions involved in long-term products – such as life insurance or retirement products – already retain records beyond the statutory minimum. By contrast, the impact is likely to be more pronounced for sectors where engagements are shorter and record-retention practices are tightly aligned to statutory minimums.
“For legal practitioners and those providing shorter-term loans, keeping records for seven years instead of five is probably going to require re-engineering of your data-retention policy,” he says.
The amendment does not change the nature of the records to be kept, but it does require institutions to reassess storage, retention and deletion protocols to ensure compliance with the extended timeframe.
Asset-freezing and jurisdictional changes
The Bill introduces interrelated amendments to FICA that affect how assets are frozen and how information may be collected and shared in support of AML/CFT enforcement.
The Bill refines and clarifies the framework under which accounts linked to sanctioned persons or entities may be frozen, while still permitting limited transactions for defined essential or extraordinary expenses, subject to approval and reporting requirements.
An amendment extends jurisdiction for certain asset-freezing applications to magistrates’ courts. The expanded jurisdiction is expected to make the process more accessible and cost-effective.
Seyffert raises a practical question arising from this change: whether it signals an expectation of increased use of freezing orders or whether it simply aligns procedure with enforcement realities. Regardless of intent, accountable institutions may experience a higher volume of freezing-related directives and must ensure that internal processes allow for prompt implementation.
Strengthening information requests – municipalities and public entities
A significant aspect of the Bill’s information-collection framework is the expansion of the Financial Intelligence Centre’s powers to request information from a broader range of entities, including municipalities and public entities. Seyffert describes this as the correction of a notable omission in the legislative framework rather than a policy shift.
The amendments will significantly widen the scope for tracking and probing financial flows, particularly in areas susceptible to corruption and money laundering. “It closes a loop,” Orffer says, particularly in relation to procurement, tenders and property-related money-laundering risks.
From an AML perspective, the inclusion of municipalities and public entities means that relationships involving income from public-sector sources may require closer scrutiny within accountable institutions’ risk-based frameworks. Institutions dealing with government-linked entities will require updated onboarding, risk assessment and record-keeping protocols.
Significant and beneficial owners: strengthening enforcement reach
The Bill also amends the FSRA to allow regulators to obtain information directly from significant owners and beneficial owners and to initiate investigations where a contravention has occurred, is occurring or may occur.
Seyffert says this represents a more direct approach to enforcement. “It strengthens the hand of the regulator, especially where the licensed entity is effectively a shell.”
The significant and beneficial owner amendments are designed to align with the FATF’s expectations, says Orffer. The FATF’s recommendations require countries not only to identify and verify beneficial ownership but also to ensure that AML measures are implemented consistently and sustainably.
The FATF places strong importance on continuous implementation. The organisation wants to see that countries are not merely changing their laws in response to pressure (for example, to get off the grey list) but are genuinely building and maintaining systems that guarantee ongoing identification, verification and action regarding beneficial ownership, Orffer says.
