The year 2024 has been marked by significant events that have impacted South Africa's financial landscape. From global cocaine smuggling operations to local financial crimes, these events have underscored the importance of vigilance and proactive measures in combating financial crime.
Another significant case involved fake mining operations in South Africa. Fake mines claimed VAT refunds on gold production costs, despite not conducting any real mining activities. What we can learn from this case is that the fight against financial crime in the gold industry is ongoing, and it is the responsibility of Accountable Institutions (AIs) to stay proactive in identifying and mitigating risks.
The Banxso saga, which is still ongoing, involves a trading platform that was allegedly used for fraudulent activities. The Financial Intelligence Centre (FIC) ordered banks to freeze all the accounts that belonged to Banxso, and the company's license was provisionally withdrawn. This case highlights the importance of ensuring compliance with the Financial Intelligence Center Act (FICA). It is important that processes are kept up to date and able to deal with financial fraud in the technological era.
The FIC issued several new PCCs this year, providing guidance on various aspects of FICA compliance:
The FIC issued Directive 6 and 7 requiring Designated Non-financial Businesses and Professions (DNFBPs) to complete and submit a Risk and Compliance Return (RCR). The FIC conducted inspections and found several institutions that had not submitted their RCRs, resulting in non-compliance, fines and remedial action.
During the 2023/2024 period, the FIC conducted 558 inspections, with 269 of these focusing specifically on institutions that failed to submit their RCRs. These returns are crucial for meeting the obligations set out in Directive 6 and Directive 7.
The inspections uncovered a total of 191 non-compliant institutions, leading to the issuance of 186 formal notices. Of these, 83 institutions took corrective action by submitting their overdue RCRs, bringing them back into compliance.
In addition, 18 institutions opted to settle their non-compliance by paying fines, while the remaining institutions submitted representations for reconsideration, which are now pending review by the FIC’s adjudication panel.
According to the Financial Action Task Force (FATF), South Africa has made significant progress in strengthening its Anti-Money Laundering and Combating the Financing of Terrorism (AML/CFT) framework. The country has successfully addressed 16 out of 22 action items outlined in its action plan, with six remaining items to be completed by February 2025.
2024 has been a year of significant challenges and developments in financial crime. The FIC has been active in issuing new PCCs, conducting inspections, and imposing administrative sanctions. South Africa has made progress in strengthening its AML/CFT framework, but there is still much work to be done. It is essential for AIs to stay informed and proactive in identifying and mitigating risks and to work together to build a stronger, more resilient South Africa.
Remember to sign up to our newsletter to stay informed of continuous changes in the ever evolving anti-money laundering and FICA landscape.