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South African banks threatened by delay in money-laundering law, global body says
April 24, 2017 / 2:45 PM / 4 months ago

South African banks threatened by delay in money-laundering law, global body says

CAPE TOWN, April 24 (Reuters) - A global group that monitors money laundering worldwide has expressed concern that a bill to fight the crime in South Africa faces "significant ongoing delays" and warned the country's banks risked being exposed to illicit money flows that could hurt investor sentiment.

David Lewis, executive secretary at the Paris-based Financial Action Task Force (FATF), said on Monday that South Africa also risked being struck off its membership if it failed to pass the law in time for FATF's next meeting in June.

Lewis told Reuters that South Africa could be sending the wrong signal worldwide on "the financial sector about the risks of business relationships involving South Africa."

In 2009, a FATF team recommended specific actions for South Africa after identifying a number of deficiencies. They included a lack of enforceable obligations for financial institutions to identify politically exposed persons.

"Effective action to mitigate the risk of corruption by politically exposed persons, as set out by the FATF Standards, is extremely important, particularly in the context of Africa, where corruption has been recognised as a problem," said Lewis.

The Financial Intelligence Centre Amendment (FICA) bill, which is required for local banks to remain part of the international banking system, has still not been signed into law, although it was first passed by the country's 400-member national assembly in May 2016.

Last year, President Jacob Zuma sent it back to parliament over concern about its constitutionality and its allowing searches without having a court-approved warrant.

Lawmakers voted for it across party lines and sent it back to Zuma for ratification in February, practically unchanged from when parliament first sent it to the president.

"Time is running out. And now we are actually saying one of the most effectual sectors in society, the financial sector, we want to weaken it and it doesn't make sense," said Cas Coovadia, managing director at the Banking Association of South Africa.

Zuma has been lobbied by the Black Business Council not to sign the bill, citing that it is unconstitutional.

A presidency spokesman said they would call back after checking with legal officers on reasons for the delay and when Zuma was expected to sign.

The bill is meant to bolster the fight against global financial crime by making it easier to identify ultimate owners of companies and accounts - including those of "domestic prominent influential persons" such as cabinet ministers. (Reporting by Wendell Roelf; Editing by James Macharia, Larry King)

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