SA’s financial intelligence standards lag far behind the rest of the world: Treasury

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National Treasury has warned that South Africa has four months to tighten its financial intelligence legislation to international standards or risk being greylisted.

Treasury and the Financial Intelligence Centre have briefed parliament’s Joint Standing and Select Committees on Finance this week on the amendments to Schedules 1, 2, and 3 of the Financial Intelligence Centre Act 38 of 2001, and informed the house that if things remain the same, international regulators in the United Kingdom, United States of America, Japan, and China may restrict their domestic banks from transacting with banks in the country.

“Our anti-money laundering system is very well behind international standards,” says Acting Director General of the National Treasury, Ismail Momoniat.

Momoniat adds that when evaluating particular standards and other countries, Treasury found that other states have moved so far along in terms of financial intelligence standards that their regulatory frameworks are not only designated to specified financial institutions but extend to designated non-financial businesses and professions.

In addition, the National Treasury warns that international countries may begin to impose penalties and fines on South African financial institutions, and the country risks losing critical correspondent banking relationships with overseas banks.

Local banks’ ability to expand globally will also be restricted.

The Executive Manager for Legal and Policy at the Financial Intelligence Centre, Pieter Smit said the implications of this will inevitably be the cost of business going up.

He adds, “Regulators in foreign countries watch institutions much more closely than they do business with and institutions in listed countries become a lot slower. As such to enter new markets internationally becomes very restricted because the regulations of those markets become very protective of allowing institutions from listed countries into their markets.”

Responding to the statements by the Acting Director General, members of parliament criticised the National Treasury for taking too long to make these amendments, saying the deadline of October is around the corner.

The amendments will have to be approved by Parliament.