State of the Nation 2024
Type of recommendation
Reforms to the financial system
Part 6, Volume 1, Page 264
Category- Legislative Change
- Reforms to the financial system
Part 6, Volume 1, Page 264
Amend legislation governing banks to ensure fair hearing before closing accounts
Category:
- • Legislative Change
- • Reforms to the financial system
Description:
It recommended that relevant existing legislation governing banks be amended to introduce a requirement of fairness and/or place an obligation on the banks to hear the client before they can close the bank account of that particular client, or if warranted, a new piece of legislation be enacted which will make this a requirement.
Responsible to implement:
• National Treasury
Actions on recommendations
With respect to the recommendation that banks be required to follow a fair process when considering the closure of a client's accounts, National Treasury will review whether the current standards need to be strengthened to better protect retail customers from bank closures from a financial inclusion perspective, to the extent that they comply with anti-money laundering legislation and other applicable laws.
Progress as at November 2023
The regulatory powers that will strengthen the current Conduct Standard are entrenched in the Conduct of Financial Institutions Bill (COFI) Bill. The review of the Conduct Standard for Banks by the Financial Sector Conduct Authority (FSCA) is still underway to identify gaps to better protect the customers. The review of the financial sector code is still underway between the Financial Sector Transformation Council (FSTC) constituencies.
Part 1, Volume 3, Page 714
Category- Legislative Change
- Reforms to the financial system
Part 1, Volume 3, Page 714
Amend SARS Act for open, transparent and competitive appointment of SARS Commissioner
Category:
- • Legislative Change
- • Reforms to the financial system
Description:
It is recommended that the SARS Act of 1997 (as amended) be amended to provide for an open, transparent and competitive process for the appointment of Commissioner of SARS.
Responsible to implement:
• National Treasury
Actions on recommendations
The National Treasury has initiated the process to amend the SARS Act to implement the recommendations of the Nugent Commission, including providing for an open, transparent and competitive process for the appointment of the SARS Commissioner and the appointment of adequate oversight mechanisms such as an Inspector-General. Legislation will be tabled by June 2023.
Progress as at November 2023
Work on the drafting of amendments to the SARS Act is underway.
Part 6, Volume 3, Page 829
Category- Operational / Regulatory Change
- Reforms to the financial system
Part 6, Volume 3, Page 829
Institute a co-ordinated and co-operative approach to targeting money laundering
Category:
- • Operational / Regulatory Change
- • Reforms to the financial system
Description:
A co-ordinated and co-operative approach to targeting money laundering is required from all the relevant enforcement agencies and, at least, the Asset Forfeiture Unit of the National Prosecution Authority (NPA), the Hawks, the Financial Intelligence Centre, the Investigating Directorate of the NPA, the South African Revenue Service, the South African Reserve Bank and the Special Investigating Unit.
Responsible to implement:
• National Treasury
Actions on recommendations
The matter of statutory frameworks for financial information-sharing partnerships has been included in the General Laws (Anti-Money Laundering and Combating Terrorism Financing) Amendment Bill, which has been tabled in Parliament and is currently before the NA Finance Portfolio Committee. This Bill aims to address the deficiencies identified by the Financial Action Task Force (FATF) and International Monetary Fund in their mutual evaluation of South Africa in 2021.
Progress as at November 2023
The General Laws (Anti-Money Laundering and Combating Terrorism Financing) Amendment Act (GLAA) became law in December 2022. The GLAA amended the Companies Act, Trust Property Control Act, Nonprofit Organisations Act, Financial Intelligence Centre Act, and Financial Sector Regulation Act. Amendments to the Companies Act, Trust Property Control Act and Nonprofit Organisations Act. All necessary regulations required by GLAA are now in effect, and the affected agencies (CIPC, Masters Office, NPO Directorate at the Department of Social Development) have been implementing systems to capture beneficial ownership information. The anti-money laundering regime is also being strengthened by: •Building the capacity to supervise designated non-financial businesses and professions that are at risk of abuse by money launderers; and •Strengthening the system for managing cross-border flows of cash. SA’s law enforcement agencies are collaborating more closely to prioritise money laundering investigations and prosecutions, especially those that relate to crimes that generate large volumes of illicit proceeds: corruption, tax evasion and fraud. Asset recovery relating to corruption and money laundering cases enrolled for prosecution has been prioritised in all AFU regions. The Inter-Departmental Committee on Anti-Money Laundering and Terror Financing, work is implementing plans to address the shortcomings identified by FATF together with the work already underway.
Part 6, Volume 3, Page 830
Category- Legislative Change
- Reforms to the financial system
Part 6, Volume 3, Page 830
Statutory framework for the controlled sharing of information between banks and the authorities to prevent money laundering
Category:
- • Legislative Change
- • Reforms to the financial system
Description:
It is necessary to use the anti-money laundering resources of banks in a more proactive manner. The South African Anti-Money Laundering Integrated TASK Force (SAMLIT) has been set up under the auspices of the Financial Intelligence Centre to enable banks to share with each other and with the authorities anonymised information and to discuss general trends. However, the absence of a statutory framework providing for the controlled sharing of detailed anti-money laundering information by banks appears to remain an obstacle to fighting financial crime.
Responsible to implement:
• National Treasury
Actions on recommendations
The matter of statutory frameworks for financial information-sharing partnerships has been included in the General Laws (Anti-Money Laundering and Combating Terrorism Financing) Amendment Bill, which has been tabled in Parliament and is currently before the NA Finance Portfolio Committee. This Bill aims to address the deficiencies identified by the Financial Action Task Force (FATF) and International Monetary Fund in their mutual evaluation of South Africa in 2021.
Progress as at November 2023
The General Laws (Anti-Money Laundering and Combating Terrorism Financing) Amendment Act (GLAA) became law in December 2022. The GLAA amended the Companies Act, Trust Property Control Act, Nonprofit Organisations Act, Financial Intelligence Centre Act, and Financial Sector Regulation Act. Amendments to the Companies Act, Trust Property Control Act and Nonprofit Organisations Act. All necessary regulations required by GLAA are now in effect, and the affected agencies (CIPC, Masters Office, NPO Directorate at the Department of Social Development) have been implementing systems to capture beneficial ownership information. The anti-money laundering regime is also being strengthened by: •Building the capacity to supervise designated non-financial businesses and professions that are at risk of abuse by money launderers; and •Strengthening the system for managing cross-border flows of cash. SA’s law enforcement agencies are collaborating more closely to prioritise money laundering investigations and prosecutions, especially those that relate to crimes that generate large volumes of illicit proceeds: corruption, tax evasion and fraud. Asset recovery relating to corruption and money laundering cases enrolled for prosecution has been prioritised in all AFU Regions. The Inter-Departmental Committee on Anti-Money Laundering and Terror Financing, work is implementing plans to address the shortcomings identified by FATF together with the work already underway.
Part 6, Volume 3, Page 830
Category- Operational / Regulatory Change
- Reforms to the financial system
Part 6, Volume 3, Page 830
Investigate the effectiveness of the current system of suspicious transaction and cash threshold reporting
Category:
- • Operational / Regulatory Change
- • Reforms to the financial system
Description:
There is a need to investigate the effectiveness of the current system of suspicious transaction and cash threshold reporting to the Financial Intelligence Centre (FIC) under the FIC Act. If banks are failing to make the necessary reports to the FIC, the FIC needs to take action against them, but if Banks are making the necessary reports but no action is being taken against the money-laundering networks, that suggests either a flaw in the current system or its implementation by the FIC and downstream enforcement agencies. In this context, the Commission recommends that the FIC should conduct an urgent review into: - the compliance of South African banks with the FIC Act in relation to proceeds of state capture laundered through accounts held by them identifying whether, and to what extent, the FIC was alerted to these activities by reports under the FIC Act - what action was taken by the FIC pursuant to any relevant reports received from South African banks in this regard - what reports or recommendations were made by the FIC to other law enforcement agencies - what steps, if any, were taken by those enforcement agencies to act on the recommendations of the FIC
Responsible to implement:
• Financial Intelligence Centre
Actions on recommendations
The Financial Intelligence Centre (FIC) has appointed attorneys to conduct an urgent independent review of the effectiveness of the current regulatory reporting regime under the FIC Act. It will also undertake a review of what banks had reported in relation to possible state capture transactions, what the FIC had done with the reports, what referrals the FIC had made to law enforcement agencies and what the law enforcement agencies had done with such referrals. The FIC briefed the attorneys on 26 August 2022 and is awaiting the project plan from the attorneys, which will include the duration of the review.
Progress as at November 2023
The Financial Intelligence Centre (FIC) has provided a progress report on phase 2 of the review, as per recommendations of the Commission. This report contains preliminary findings that the FIC is proving to be effective insofar as the law enforcement agencies (LEAs) derive value from the FIC's intelligence reports, particularly in recent years. However, the Review has revealed some systematic implementation gaps which if tightened, can result in enhanced efficiency for the FIC, LEAs and supervisory bodies.
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