SA joins anti-dirty money body
30 June 2003
The Paris-based Financial Action Task Force (FATF), the world body leading the fight against money laundering, has accepted South Africa into its ranks.
The FATF, meeting in Berlin this month to update its standards in combating the flow of drug money, tax evasion and "terror financing", welcomed South Africa as its 30th member - and first African member - saying the country had made big progress in tightening its controls.
South Africa launched an initiative to fight "dirty money" in 2002, including rules to prevent blatant violations of sound practice, which included people being able to buy houses or open bank accounts with suitcases of cash.
The FATF, established in 1989, is an independent body of officials and experts from 31 countries plus the European Union's executive commission and the Gulf Cooperation Council.
In 1990 the FATF issued 40 recommendations designed to fight money laundering and terrorist financing initiatives globally. The recommendations have been revised and added to more than once since then, and the latest revised recommendations were adopted at its June meeting in Berlin.
Anti-money laundering legislation
Reporting on its evaluation of South Africa, carried out in April 2003, the FATF states that South Africa has developed a comprehensive legal structure to combat money laundering.
Currently, South Africa's main anti-money laundering legislation is the Prevention of Organised Crime Act 1998 and the Financial Intelligence Centre Act 2001.
"Although certain financial sector obligations existed under previous legislation", the FATF notes, "the Financial Intelligence Centre Act creates a broad and more organised framework of anti-money laundering measures."
Among other things, the Act creates a range of anti-money laundering obligations - including customer identification, record-keeping requirements, and internal controls - for banks, securities and investment firms, insurance companies, bureaux de change, money remitters, casinos, dealers in travellers' cheques and money orders, as well as lawyers and accountants.
"The laws and regulations concerning the maintenance of high standards of integrity and the necessary internal controls by financial institutions are satisfactory in most respects", the FATF found, the key issue being "to ensure that anti-money laundering requirements are being properly implemented by institutions".
South AFrica's main supervisory bodies are the Reserve Bank, which supervises banks, money remittance and currency exchange business, and the Financial Services Board, which supervises all other financial institutions.
The Prevention of Organised Crime Act contains comprehensive measures to freeze and confiscate the proceeds and instrumentalities of crime, including both criminal confiscation and civil forfeiture. South Africa, the FATF report states, has "applied increased resources to this area, and these measures have been quite successful, with a steady annual increase in the property that has been frozen and confiscated".
The FATF notes, however, that South Africa "cannot currently seize property used to finance terrorism, and has only limited ability to freeze funds in financial institutions, and therefore cannot fully implement the relevant FATF recommendations and UN Security Council Resolutions".
However, a draft bill that will address many aspects of the fight against terrorism and terrorist financing has been presented to Parliament and is presently being considered by a parliamentary committee.
Investigating & prosecuting agencies
South Africa has a number of agencies that investigate and prosecute cases involving money laundering.
The National Prosecuting Authority (NPA) provides a national framework for prosecutions. Within the NPA, the Directorate of Special Operations - also known as "The Scorpions" - investigates and prosecutes a range of more serious cases, while the NPA's Asset Forfeiture Unit supports the police and other law enforcement structures in all aspects of forfeiture.
The South African Police Service investigates criminal activity generally, and has allocated the responsibility for investigating money laundering to specific units.
The South Africa Revenue Service, which includes the Customs Service, is responsible for revenue collection and the investigation of tax evasion and evasion of customs duties, and works closely with law enforcement agencies on money laundering matters.
"Investigators have adequate legal means to obtain bank records and other information and evidence regarding alleged offences", the FATF evaluators found. "Investigators also have sufficient legal tools for a wide range of investigative techniques, including controlled delivery, undercover operations, and wiretaps."
Financial Intelligence Centre
In February 2003, South Africa's Financial Intelligence Centre (FIC), established in terms of the Financial Intelligence Centre Act, became operational and began receiving, analysing and disseminating suspicious transaction reports.
"In a short period of time, the FIC has made significant strides towards becoming an operational financial intelligence unit", the FATF found, "and appears adequately structured, funded, staffed and provided with the necessary resources and powers to fully perform its authorised functions.
"The legal provisions allow for co-operation with domestic authorities and foreign counterparts and appear comprehensive, but have not yet been fully put into practice. It is too early to assess the effectiveness of the FIC, but early results appear promising."
South Africa has broad powers to provide a wide range of mutual legal assistance and extradition related to money laundering matters. The country has acceded to the 1988 Vienna Convention, has ratified the 1999 UN Convention on the Suppression of Terrorist Financing, and is working to ratify the 2000 Palermo Convention. It has also entered into many bilateral treaties and agreements, either for mutual legal assistance or at a law enforcement level.
SouthAfrica.info reporter
