Anti-Money Laundering Bill Criticised For Placing Extra Burden On South Africa's Financial Services Industry

by Robert Lee, Tax-News.com, London

09 August 2001

South Africa's new Financial Intelligence Centre Bill is designed to reveal transactions linked to money laundering but Felicite Kirkman, legal adviser at M Cubed Capital, a financial solutions provider, predicts that it will place yet another heavy burden on a struggling financial services industry.

The Bill requires financial institutions to report all suspicious transactions to the Financial Intelligence Centre, the role of which is to co-ordinate official activities to curb money-laundering attempts, and prepare guidelines for financial institutions. Under the Bill a new body, the Money Laundering Advisory Council, will be established to act as an advisory body on policies and measures.

But according to a report from the ZA Finance news service, Ms Kirkman says the Bill would simply add to the burden and expense that is already imposed on the industry by the Policyholders' Protection Rules and Financial Advisors and Intermediaries' Services Bill (FAIS).

In previous years, various forms of legislation have been introduced and the Financial Intelligence Centre Bill is the latest attempt to combat the increasing problem of money laundering. 'The Bill is a response to the growing view that South Africa, with its relatively sophisticated financial services industry, increased integration into world financial systems and free capital flow, coupled with a strained criminal justice system, is becoming a target for money launderers,' she said.

Ms Kirkman explained that the Bill calls upon "accountable institutions", which are defined as anything from unit trust companies, insurers and banks to estate agents, attorneys and casinos, to maintain precise records of all client transactions for a period of five years. All cash transactions in excess of R50,000 must be reported - although this does not mean they will automatically be investigated - and it will be illegal to divide transactions into smaller sums in an attempt to disguise the actual amount of money involved. 'Training of staff will also have to take place in order to prepare them for the implementation of the Bill. They will have to be made aware of facts to look out for and how to recognise a potential money laundering transaction,' said Ms Kirkman.

And the burden doesn't stop there, argues Ms Kirkman. Customer identity must be disclosed by the institution, and this is likely to be an administrative complexity as it will require more than a copy of an identity document - measures will have to be put in place which will not only authenticate the identity of new clients but also of existing clients before they can embark upon any further transactions. It is vital, explains Ms Kirkman, that the accountable institution should know its client, which obligates it to gather information on the client's business and financial activities prior to the completion of any transactions.

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