South African Lawyers Worry About New KYC Rules

by Justin Gorringe, LawAndTax-News.com, London

21 March 2003

Although the Financial Intelligence Centre Act was introduced in 2001, legislation in relation to 'know your client' rules took effect only at the beginning of March: it is this requirement which South African lawyers are concerned about.

Lawyers may be fined up to R10 million (almost £790,000/$1.23m) or imprisoned for up to 15 years if they fail to report a suspicious transaction or verify a client's identity. Failure to formulate and implement internal rules is also an offence, and on conviction lawyers are liable for imprisonment of up to five years or a fine of up to R1 million (£79,000/$123,000).

Willie Hofmeyr, the deputy National Director of Public Prosecutions, conceded some of the new measures might be bothersome to business, but said private sector co-operation was vital.

"It is also important for you to realise that there are people in this country who are flouting the law at the moment," he said. While most institutions were fairly co-operative, others were not taking the law seriously.

"Measures against money laundering should not only be aimed against criminals. One should also make it difficult for people to do business with criminals", he added. In future, the focus would increasingly shift to what Hofmeyr labelled passive collaborators, or people who tended to turn a blind eye.

Turning to the new anti-corruption Bill before Parliament, Hofmeyr said the proposed measure went beyond corruption in the public sector. Hofmeyr said the proposed legislation would hopefully be passed this year, although the more difficult and controversial provisions were likely to be held over.

A highlight of more aggressive state action against corruption was the formation of a sixty strong task team to tackle irregularities in the Eastern Cape. "Since December, when the team was set up, we have made close to fifty arrests, and there will be more in the months to come," said the prosecutor.

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