BUSINESS LAW &TAX
OCTOBER 2024 WWW.BUSINESSLIVE.CO.ZA
A REVIEW OF DEVELOPMENTS IN CORPORATE AND TAX LAW
Fifty shades of greylisting SA address the remaining •14Can action items by January 2025? Era Gunning ENS A is required to address 22 identideficiencies fied within specified timeframes. By June 2024, the country had addressed or largely addressed eight of these items. These items relate to the legal provisions criminalising terrorist financing and underpinning SA’s targeted financial sanction regimes, increasing the use of financial intelligence from the Financial Intelligence Centre (FIC) to support money laundering investigations, the introduction of risk-based tools to identify higher-risk “Designated Non-Financial Businesses and Professions”, the updating of the Terror Financing National Risk Assessment, and increasing the resources and capacity of relevant authorities. If SA addresses the remaining 14 action items by January 2025, it could be removed from the greylist by June 2025. In a media statement published on July 2 2024, National Treasury noted that while SA is on track to address all the outstanding action items, it remains a tough challenge
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to address all 14 items by the deadline. All relevant agencies and authorities will need to continue to demonstrate significant improvements, and that such improvements are being sustained and are effective. In one of the attempts to address the deficiencies identified by the FATF, the schedules to the Financial Intelligence Centre Act, 2001 (Fica) were amended in November 2022 by the addition of several accountable institutions that must now comply with Fica. These include dealers in the retail and wholesale sector in highvalue goods (where an item is valued in that business at R100,000 or more), certain credit providers, crypto asset service providers and some trustees. The FIC and the Prudential Authority of the South African
THE FIC IS OBLIGED TO IMPOSE ADMINISTRATIVE SANCTIONS TO PROMOTE A CHANGE IN COMPLIANCE BEHAVIOUR
ACCOUNTABILITY, IN BLACK AND WHITE
/123RF — MAXKABAKOV Reserve Bank are actively conducting AML/CFT compliance inspections on accountable institutions. On August 13 2024, the FIC Appeal Board ruled in favour of the FIC in an appeal brought by Capital Point Properties, an estate agency (and accountable institution under Fica). The appeal challenged administrative sanctions (including financial sanctions totalling R266,000) imposed by the FIC due to Capital Point Properties’ failure to develop and implement a risk management and compliance programme in a timely manner and not scrutinising clients against the
targeted financial sanctions list. The business also failed to comply with Directive 6 of 2023, which required accountable institutions to submit a risk and compliance return questionnaire by a specified deadline. In his ruling, Judge Louis Harms, chair of the FIC Act Appeal Board, held: “The fact that a transgression has been rectified does not mean that it was not a transgression and cannot or should not be subject to a sanction.” Executive Manager for Compliance and Prevention at the FIC, Christopher Malan, has confirmed the FIC is obliged to impose adminis-
trative sanctions to promote a change in compliance behaviour. The implications are clear: Fica is not going away, and all accountable institutions must get their AML/CTF houses in order or face serious penalties, including imprisonment for a period not exceeding 15 years or fines not exceeding R100m. By way of background, the Financial Action Task Force (FATF) is an independent intergovernmental body that develops and promotes policies to protect the global financial system against money laundering, terrorist financing and the financing of
proliferation of weapons of mass destruction. The FATF recommendations are recognised as the global anti-money laundering (AML) and counterterrorist financing (CTF) standards. It identifies jurisdictions with weak AML/CTF measures in public documents that are issued three times a year. By June 2024, 133 countries and jurisdictions had been reviewed, with 108 publicly identified as noncompliant. Eighty-four of these jurisdictions have made the necessary reforms to address their AML/CTF weaknesses and have been removed from the process. SA has been a FATF member since 2003. In a Mutual Evaluation Report in 2019, the FATF concluded that SA had a solid legal framework for combating money laundering and terrorist financing, but significant shortcomings remained. These findings led to SA being greylisted in February 2023. The FATF’s greylist identifies countries that are actively working with the FATF to address strategic deficiencies in their regimes to counter money laundering, terrorist financing and proliferation financing. Such jurisdictions must resolve the identified strategic deficiencies within agreed timeframes and are subject to increased monitoring.