The process to address deficiencies in the country’s anti-money laundering and anti-terrorism financing legislation got under way this week after Minister of Finance Enoch Godongwana tabled the General Laws (Anti-Money Laundering and Combating Terrorism Financing) Amendment Bill.
The bill addresses 20 “technical” deficiencies identified by the Financial Action Task Force (FATF) in its Mutual Evaluation Report in October last year.
Ismail Momoniat, National Treasury’s acting director-general, told the National Assembly’s Standing Committee on Finance (Scof) yesterday that enacting the omnibus bill will go a long way towards averting South Africa’s potential grey-listing by the FATF in February next year.
The bill amends five pieces of legislation: the Companies Act, Financial Intelligence Centre Act (Fica), Financial Sector Regulation Act (FSRA), Non-Profit Organisations Act and Trust Property Control Act.
One of the main aims of the bill is to provide for the disclosure of the beneficial owners and the ultimate controllers of trusts, companies and non-profit organisations (NPOs).
The bill proposes amending four of the abovementioned acts (not the NPO Act) to include a definition of “beneficial owner”.
In a statement on Monday, National Treasury said Parliament would provide guidance on the process for considering the bill, including the deadlines for public participation.
Yesterday, Treasury provided Scof with a high-level view of how the legislation proposes to amend the five pieces of legislation.
The amendments to Schedule 1 of Fica, which are being dealt with via a separate legislative process, address shortfalls relating to the scope of the Act.
The amendments in the omnibus bill address other deficiencies related to a number of the FATF’s Recommendations. Treasury said the amendments will not substantially change the principles upon which customer due diligence are based but will provide for a stronger regulatory framework.
Treasury said the proposed amendments to Fica will, among other things:
- Enable the FIC to provide forensic evidence relating to the flow of financial transactions that can be used in court proceedings, for example.
- Create a distinction between domestic and foreign “politically exposed people” and “politically influential people”.
- In Schedule 3A, the designation of a “domestic prominent influential person” will be changed to “domestic politically exposed person”, and a person will be regarded as such if he or she currently holds the position or has held the position at any time.
- Create a new “prominent influential persons” designation. A person will be regarded as such if he or she currently holds the position for more than six months or held that position at any time in the preceding 12 months.
- Allow the FIC to share information with the Office of the Auditor-General.
- Clarify that the FIC can share information with the investigative division of a national department.
- Empower the FIC to enter public-private partnerships.
- Empower the FIC to request information or access to any database held by an organ of state.
- Address the steps an accountable institution must take when it doubts the veracity of the customer due diligence information it previously obtained from a client.
- Require accountable institutions to take into account proliferation financing risks when developing their risk management and compliance programmes.
- Include a definition of proliferation financing in Fica.
- Stipulate that a United Nations Security Council resolution relating to targeted financial sanctions becomes enforceable immediately upon adoption by the council.
- Extend the prohibition on transacting with a person or entity identified by a UN Security Council resolution to someone acting on behalf of or at the direction of the designed person or entity.
- Give the Minister of Finance the discretion to add to the list of supervisory bodies or to delete a supervisory body from the list if he believes it is not satisfactorily performing its functions.
The amendments provide a mechanism through which the regulators can require financial institutions to identify and verify their beneficial owners and provide information about them.
Treasury said the amendments to the Companies Act address deficiencies relating to Recommendation 24, which requires countries to ensure there is adequate, accurate and up-to-date information on the beneficial ownership and control of legal persons that can be obtained or accessed rapidly and efficiently by the authorities.
The amendments provide for:
- A “comprehensive mechanism” through which the Companies and Intellectual Property Commission (CIPC) can keep accurate and updated beneficial ownership information.
- The requirement that a company must keep a record of the natural person/s who own/s or control/s the company as a ‘‘beneficial owner’’ and must file this record with the CIPC.
- The expansion of the grounds for disqualification as a director of a company to include offences relating to money laundering, terrorism financing or the financing of nuclear, chemical or biological weapons.
Trust Property Control Act
The amendments to the Trust Property Control Act are intended to address deficiencies related to FATF Recommendation 25, which requires countries to take measures to prevent the misuse of trusts for money laundering or terrorism financing, Treasury said.
Countries should ensure there is adequate, accurate and timely information on trusts, including on the trustees and beneficiaries, that can be obtained or accessed by the authorities.
Treasury said the amendments are interim measures, because the Department of Justice and Constitutional Development is developing a new Regulation of Trust Property Bill.
The amendments to the Trust Property Control Act include:
- Trustees will have to obtain full information on beneficial ownership when creating trusts.
- Trustees will have to disclose their position as a trustee to any accountable institution with which they engage in that capacity and disclose that the relevant transaction or business relationship relates to trust property.
- Trustees will have to keep information on the beneficial owners of trusts.
- The Master of the High Court will have to maintain a register relating to the beneficial ownership of trusts.
- Specifying matters disqualifying a person from acting as a trustee.
- Creating offences when a trustee fails to perform duties in relation to certain sections of the Act.
- Empowering the Master to remove a person as a trustee if he or she becomes disqualified from acting as a trustee.
FATF Recommendation 8 stipulates that NPOs should not be misused by terrorist organisations. Countries must review the adequacy of laws and regulations relating to NPOs which the country has identified as vulnerable to terrorism financing abuse.
Treasury said the proposed amendments to the NPO Act will:
- Make it mandatory for all NPOs (including foreign NPOs operating in South Africa) to register with the NPO Directorate.
- Require all NPOs to comply with the Act, particularly in relation to governance, transparency and accountability.
- Require NPOs to submit prescribed information to the Directorate about their office-bearers, control structure, governance, management, administration and operations.
- Provide grounds for a person to be disqualified from being appointed as an office-bearer.
- Empower the Directorate to remove an office-bearer who becomes a disqualified person.
Click here for an expanded summary of the omnibus bill.
Click here to download the bill from Treasury’s website.