Countries/Jurisdictions of Primary Concern - South Africa
South Africa’s position as the major financial center in the region, its sophisticated banking and financial sector, and its large, cash-based market may make it a target for transnational and domestic crime syndicates. The proceeds of the narcotics trade constitute the largest source of laundered funds in the country. Fraud (advance fee scams, beneficiary maintenance fraud, and deposit refund scams), theft, racketeering, corruption, currency speculation, credit card skimming, wildlife poaching, theft of precious metals and minerals, human trafficking, stolen cars, and the smuggling of goods are also sources of laundered funds. Many criminal organizations also are involved in legitimate business operations. 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. Some foreign nationals are using South African nationals, mostly women, to help them send money obtained from illegal activities out of the country. Investment clubs, known as stokvels, have been used as cover for pyramid schemes. In some instances, nominee structures have been exploited by criminals who intend to launder illicit funds by mixing those funds with legitimate assets held on someone else’s behalf. There is a significant black market for smuggled and stolen goods.
South Africa passed the SEZ Act No. 16 of 2014 to allow the establishment of “Special Economic Zones.” The types of zones included under the definition include: “Industrial Development Zones (IDZs),” purpose-built industrial estates that leverage domestic and foreign fixed direct investment in value-added and export-oriented manufacturing industries and services; “Free Ports,” duty free areas adjacent to a port of entry where imported goods may be unloaded for value-adding activities; “Free Trade Zones,” duty free areas offering storage and distribution facilities for value-adding activities; and “Sector Development Zones,” zones focused on the development of a specific sector or industry through the facilitation of general or specific industrial infrastructure, incentives, and technical and business services primarily for the export market. Currently, South Africa operates IDZs. Imports related to manufacturing or processing in the zones are duty free, provided the finished product is exported. IDZs are located in Port Elizabeth, East London, Richards Bay, Saldanha Bay, Durban Dube trade port, and Johannesburg International Airport. The South African Revenue Service implements customs controls for these zones. Other new Special Economic Zones are under development.
For additional information focusing on terrorist financing, please refer to the Department of State’s Country Reports on Terrorism, which can be found at: http://www.state.gov/j/ct/rls/crt/
DO FINANCIAL INSTITUTIONS ENGAGE IN CURRENCY TRANSACTIONS RELATED
TO INTERNATIONAL NARCOTICS TRAFFICKING THAT INCLUDE SIGNIFICANT
AMOUNTS OF US CURRENCY; CURRENCY DERIVED FROM ILLEGAL SALES IN
THE U.S.; OR ILLEGAL DRUG SALES THAT OTHERWISE SIGNIFICANTLY AFFECT
THE U.S.: NO
CRIMINALIZATION OF MONEY LAUNDERING:
“All serious crimes” approach or “list” approach to predicate crimes: All serious crimes
Are legal persons covered: criminally: YES civilly: YES
KNOW-YOUR-CUSTOMER (KYC) RULES:
Enhanced due diligence procedures for PEPs: Foreign: YES Domestic: YES
KYC covered entities: Banks, credit institutions, post office banks, foreign exchange dealers, securities traders and brokers, entities that issue traveler’s checks, real estate agents, gaming institutions, gold dealers, attorneys, used car dealers, and money lenders
Number of STRs received and time frame: 355,369: April 1, 2013 - March 31, 2014
Number of CTRs received and time frame: 6.17 million: April 1, 2013 - March 31, 2014
STR covered entities: Banks, credit institutions, post office banks, foreign exchange dealers, securities traders and brokers, entities that issue traveler’s checks, real estate agents, gaming institutions, gold dealers, attorneys, used car dealers, and money lenders
MONEY LAUNDERING CRIMINAL PROSECUTIONS/CONVICTIONS:
Prosecutions: Not available
Convictions: Not available
RECORDS EXCHANGE MECHANISM:
With U.S.: MLAT: YES Other mechanism: YES
With other governments/jurisdictions: YES
South Africa is a member of the FATF and the Eastern and Southern Africa Anti-Money Laundering Group (ESAAMLG), a FATF-style regional body. Its most recent mutual evaluation can be found at: http://www.fatf-gafi.org/countries/s-t/southafrica/
ENFORCEMENT AND IMPLEMENTATION ISSUES AND COMMENTS:
The Government of South Africa’s AML/CFT regime represents a solid legal and regulatory framework for countering illicit finance. Over the last few years, the Financial Intelligence Centre (FIC), South Africa’s financial intelligence unit (FIU), has been working to enhance its effectiveness by providing investigators and prosecutors with high-quality, timely, and actionable financial intelligence. In 2013, the FIC submitted a bill to amend the FIC Act to the Ministry of Finance. The proposed amendments are still under review. The intent of the amendments is to move South Africa toward a risk-based approach (RBA). South Africa’s focus on the RBA is designed to target high-impact cases involving large amounts of money and greater numbers of criminals.
During 2013/14, the FIC referred cases valued at R8.6 billion (approximately $860 million) for further investigation. The FIC’s outreach efforts have resulted in a 140 percent increase in the number of suspicious transaction reports (STRs) received from mid-2013 to mid-2014, as compared with the previous twelve month period. FIC intelligence products highlight a range of suspected criminal activities, led by tax-related crime, fraud, and money laundering. The FIC initiated and referred 883 matters to law enforcement authorities. South Africa provides technical assistance to other countries in the region in the areas of FIU analytical capability and asset forfeiture and confiscation.
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, predicate offenses. Accordingly, the government does not generally keep separate statistics for money laundering-related prosecutions, convictions, or forfeited assets.
The National Prosecuting Authority (NPA) and the South African Police Service (SAPS) received asset forfeiture training in 2014. The SAPS is working with international partners to build financial investigative capacity to better assist the Asset Forfeiture Division of the Directorate of Priority Crime Investigations. Asset forfeitures are increasing in South Africa, and they will further increase if law enforcement agencies more aggressively pursue non-conviction-based seizures to disrupt criminal syndicates.
South Africa should continue to implement its initiatives to promote financial inclusion and its application of the RBA, and enhance the effectiveness of the FIC. South Africa should continue to develop cooperation among the NPA, the SAPS, and the FIC to increase the number of successful prosecutions. The government also should work to improve its law enforcement and prosecutorial capacity and ensure the relevant AML/CFT authorities generate and report statistics in line with international standards.