South Africa’s recent greylisting by the global financial crime watchdog, the Financial Action Task Force (FATF), has thrust the country’s financial integrity into the spotlight.
In response to the non-compliance with international standards surrounding the prevention of money laundering and terrorist financing, significant changes have been made to the Financial Intelligence Centre Act (FICA).
Serious Warning, Take Heed
These amendments now require businesses engaged in significant financial transactions, known as accountable institutions, to conduct due diligence or face penalties.
Banks, estate agents, conveyancing attorneys, and vehicle dealerships are among those now held to the same compliance standards.
The South African Reserve Bank’s Prudential Authority (PA) has demonstrated the gravity of the situation by imposing sanctions on a central South African bank that failed to comply with the Financial Intelligence Centre (FIC) Act.
The bank received a reprimand, a directive to take corrective action, and a substantial financial penalty of R35 million for non-compliance.
Fighting Financial Crime
The establishment of FICA in 2001 aimed to combat money laundering and terrorist financing.
Accountable institutions must implement anti-money laundering measures, report suspicious transactions, and cooperate with FIC investigations.
Compliance is Critical to Reverse Greylisting
Compliance with FICA is crucial for South Africa to shed its greylisting status and restore the integrity of its financial system.
It helps protect reputations, avoid penalties, and combat illicit activities. Failure to comply not only results in financial penalties but also opens the door to criminal prosecution and reputational damage, making it imperative for institutions to demonstrate their accountability.
The enhanced compliance requirements for accountable institutions in terms of FICA require such businesses to:

Perform customer due diligence (CDD): Accountable institutions are required to identify and verify the identity of their customers. This includes obtaining information such as the customer’s name, address, date of birth, and identity document number.
Report suspicious transactions: Accountable institutions are required to report any suspicious transactions to the Financial Intelligence Centre (FIC). A suspicious transaction is one that gives rise to a reasonable suspicion that it may involve money laundering or terrorist financing.
Implement anti-money laundering and counter-terrorist financing (AML/CFT) measures: Accountable institutions are required to implement AML/CFT measures to prevent and detect money laundering and terrorist financing. These measures may include:

Maintaining records of customer transactions;
Training staff on AML/CFT matters;
Conducting internal audits; and
Cooperating with the FIC’s investigations.

Accountability Through Data
Companies can rely on data aggregation platforms like SearchWorks. Such platforms offer accurate KYC (know your customer) and KYB (know your business) checks, simplifying the due diligence process.
Proactive Prevention
Proactively preventing corrupt individuals from infiltrating the legitimate financial system is crucial, and thorough Politically Exposed Person (PEP) and Sanctions checks during customer onboarding and reviews are indispensable.
These checks provide essential data to mitigate potential financial and reputational damage.
Adapt or Face Sanctions
SearchWorks has taken additional steps to enhance its search capabilities, introducing ID photo verification searches, and enabling retrieval of an individual’s latest identity or passport image using their ID number.
They added the Customized Search Information (CSI) spousal verification check to verify associated spousal information, further improving KYC checks.
Embracing these technological advancements can help accountable institutions adapt and create additional business value by reducing fraud, safeguarding their reputation and capital, and simplifying reporting and compliance duties.
South Africa’s greylisting by the FATF necessitates urgent action to ensure compliance with the amended FICA.
Accountable institutions must take the initiative to conduct due diligence, report suspicious transactions, and implement anti-money laundering measures. Failure to comply will result in severe consequences.
Through SearchWorks, institutions fortify efforts against financial crime, protect the financial system, and regain international trust.
The time for proactive prevention and enhanced compliance is now.
By Sameer Kumandan, Managing Director of SearchWorks.