South Africa – Know Your Customer (KYC) Rules

 

 

South Africa‘s position as the major financial center in the region, its sophisticated banking and financial sector, and its large, cash-based market make it vulnerable to exploitation by transnational and domestic crime syndicates. The largest source of laundered funds in the country is proceeds from the narcotics trade. Fraud, theft, racketeering, corruption, currency speculation, credit card skimming, poaching, theft of precious metals and minerals, human trafficking, stolen cars, and smuggling are also sources of laundered funds.

Many criminal organizations are also involved in legitimate business operations. There is a significant black market for smuggled and stolen goods. In addition to criminal activity by South African nationals, observers note criminal activity by Nigerian, Pakistani, Andean and Indian drug traffickers, Chinese triads, Taiwanese groups, Bulgarian credit card skimmers, Lebanese trading syndicates, and the Russian mafia.

South Africa is not an offshore financial center, nor does it have free trade zones. South Africa does operate Industrial Development Zones (IDZs). Imports and exports related to manufacturing or processing in the zones are duty free, provided that the finished product is exported. IDZs are located in Port Elizabeth, East London, Richards Bay, and Johannesburg International Airport. The South African Revenue Service monitors the customs control of these zones.

KNOW-YOUR-CUSTOMER (KYC) RULES:

 

Enhanced due diligence procedures for PEPs:

 

PEP is an abbreviation for Politically Exposed Person, a term that describes a person who has been entrusted with a prominent public function, or an individual who is closely related to such a person. The terms PEP, Politically Exposed Person and Senior Foreign Political Figure are often used interchangeably

    • Foreign PEP: YES
    • Domestic PEP: YES

South Africa – KYC covered entities

 

The following is a list of Know Your Customer entities covered by South African Law:

    • Banks
    • Credit institutions
    • Post office banks
    • Foreign exchange dealers
    • Securities traders and brokers
    • Entities that issue travelers checks
    • Real estate agents
    • Gambling institutions
    • Gold dealers
    • Attorneys
    • Second hand car dealers
    • Money lenders

South Africa – Suspicious Transaction Reporting (STR) Requirements:

 

Number of STRs received and time frame: 36,990 – April 1, 2010 – March 31, 2011

Number of CTRs received and time frame: 4,227,253 – October 4, 2010 – October 4, 2011

The following is a list of STR covered entities covered by South African Law:

    • Banks
    • Credit institutions
    • Post office banks
    • Foreign exchange dealers
    • Securities traders and brokers
    • Entities that issue travelers checks
    • Real estate agents
    • Gambling institutions
    • Gold dealers
    • Attorneys
    • Second hand car dealers
    • Money lenders

MONEY LAUNDERING CRIMINAL PROSECUTIONS/CONVICTIONS:

 

Prosecutions: Not available
Convictions: Not available

ENFORCEMENT AND IMPLEMENTATION ISSUES AND COMMENTS:

South Africa‘s AML/CFT regime has a solid legal and regulatory framework. However, there are gaps in enforcement of the reporting requirements, due in part to South Africa‘s large informal and cash-based economy. Over recent years, South Africa has recognized the vulnerability posed by this, and has embarked upon financial inclusion initiatives.

South Africa‘s FIU, known as the Financial Intelligence Centre (FIC), is a capable authority working to enhance its effectiveness by providing high-quality, timely and actionable financial intelligence rather than larger volumes of lower-quality intelligence, much of which cannot be acted upon. During 2010/11, the Financial Intelligence Centre (FIC) identified various direct connections between criminal conduct and financial benefit, and froze just over R6.7 million (approx. $844,380) in bank accounts.

The capacity of South Africa‘s law enforcement authorities needs improvement. While money laundering is a specific offense under the South African penal code, it is not often charged as a stand-alone offense. Instead, prosecutors typically include money laundering as a secondary charge in conjunction with other offenses. Accordingly, South Africa does not generally keep separate statistics for money laundering-related prosecutions, convictions, or forfeited assets.

South Africa has been working to improve its AML/CFT regime. Its focus on the risk-based approach (RBA) is designed to target high-impact cases involving large amounts of money and greater numbers of people. The Government of South Africa should continue to implement its initiatives and improvements on financial inclusion, its application of the RBA, and enhancing the FIC. South Africa should also work to improve its law enforcement and prosecutorial capacity and ensure that its respective AML/CFT authorities keep statistics, as required by international standards.