Cenfri board member and UWC Law Professor, Vivienne Lawack. Image: Supplied

Two decades after the implementation of global standards to combat money laundering, terror financing and the financing of weapons of mass destruction, participants at a two-day seminar hosted by the University of the Western Cape have highlighted problems and made recommendations on improving the regulations by the Financial Action Task Force (FATF).

Another focus of the two-day meeting was to address inclusive financial integrity. Organised by the Centre for Financial Regulation and Inclusion (Cenfri), La Trobe University in Australia and UWC, the meeting included bankers, regulators and academics, supervisors, donors, funders and civil society organisations.

The FATF is a global money laundering and terror financing watchdog which sets international standards to prevent these illegal activities. Last year, it placed South Africa on its international greylist due to significant deficiencies in its anti-money laundering and counter-terrorist financing (AML/CFT) regime. On the first day of the meeting, the National Treasury’s former acting Director-General, Ismail Momoniat, said anti-money laundering laws have done little to halt corruption, and that, in fact, it has gotten worse after 2010.

He said the geopolitics of the world has since changed, seemingly okaying corruption by Western institutions in other countries, particularly pointing to America’s Foreign Corrupt Practices Act, which the Trump administration indicated it would not police. This has implications, he said, for the McKinseys and Bains, which have been found liable for corruption in South Africa. 

Image: Supplied

The American consulting firms have been heavily implicated in state capture at parastatals by the Zondo Commission of Inquiry and have had to pay hundreds of millions of rands in fines to avoid being blacklisted by the State. Momoniat said the sole focus on anti-money laundering and not the big predicate crimes leading to money laundering is a mistake. Participants are also critical of the FATF’s greylisting of South Africa, and although its effects are devastating, there are also incentives for South Africa to fix its policies.

While innovations like the Mzansi account intended to include the formerly unbanked into the formal economy, Momoniat said the banking industry abandoned the idea upon realising that many accounts became dormant because people did not have money due to South Africa’s stagnant economy.

Momoniat is also critical of banks that unilaterally closed accounts, citing reputational risk and stating that a bank account is a fundamental human right. A distinction, he said, has to be drawn between large entities abusing banking facilities to commit crime and individuals for whom banking facilities are required to conduct their ordinary lives. 

On corruption, Momoniat said the Treasury's mistake is focusing too much on financial regulations and not enough on tender fraud. Participants at the meeting also called out estate agents and car dealers for often turning a blind eye to money laundering. 

The Financial Intelligence Centre’s Executive Manager: Compliance and Prevention, Christopher Malan, said criminals often purchase vehicles and property with the proceeds of crime.

“According to our risk assessments, motor vehicle dealers are high (on the list), and we expect them to place serious scrutiny on the (cash) deals, particularly deals that involve officials from a municipality or provincial government,” said Malan.

Cenfri board member and UWC Law Professor, Vivienne Lawack, said the meeting stood out for the opportunity to bring all the roleplayers into a single room and discuss how to combat South Africa’s banking systems being used for money laundering, terror financing and the acquisition of weapons of mass destruction.

Cenfri associate, Liebe Burger, said the meeting was important because participants discussed responses to money laundering and how technology will influence this fight in the future.