By Jessie Taylor



Financial crimes such as fraud and money laundering have been in the spotlight in South Africa, especially as the Judicial Commission of Inquiry into State Capture highlights the extent of corruption in the public sector.

Money laundering is the process used by criminals to hide, conceal or disguise the nature, source, location, and movement of the proceeds of crime.

While fighting this type of crime primarily falls to law enforcement agencies, the National Treasury has a key role in reducing financial crime and adhering to recommendations set up by the watchdog Financial Action Task Force (FATF).


Championing a corruption and crime-free country

Leading the fight against corruption is National Treasury Deputy Director-General Ismail Momoniat, who was one of the key figures behind the Public Finances Management Act. “I drove that process, obviously with the support of the Minister, who was Trevor Manuel, and the DG at that point, Maria Ramos,” said Mr. Momoniat, in an interview with Public Sector Leaders.

As the Head of Tax and Financial Sector Policy, Mr. Momoniat has been vocal in condemning state capture, and other types of financial crime, and sees a willingness, from the State, to address these issues.

“You see the government today is committed to ensuring [an] ability to deal with financial crimes.”

To protect South Africa’s financial resources, Treasury plans to present to Parliament draft legislation to deal with financial crimes. The draft legislation is expected to be ready later this year, says Mr. Momoniat. “The new legislation is just fixing up gaps.”

The legislation comes in response to a FATF report, which found South Africa scored poorly in several outcomes, including identifying terrorism financing and reporting on suspicious transactions. Following the report, Cabinet established an intergovernmental task team to deal with the identified weaknesses and ensure greater collaboration between law enforcement agencies. 

The FATF is an international body developing policies to combat money laundering and other financial crimes. The organisation is the global money laundering and terrorist financing watchdog. As an inter-governmental body, the FATF sets the international standards for preventing financial crimes and other illegal activities.

However, Mr. Momoniat points out that even without the FATF standards, it would still be important for us to address gaps which allow for financial crime. “We’re not trying to meet the standards because of FATF,” he emphasised. “In a way it’s in our own interest to do so.”

More than 200 countries and jurisdictions have committed to implementing the FATF’s standards. But, as Mr. Momoniat points out, countries don’t have to be members of the FATF to meet those standards.


Creating an economy safe from financial crimes

South Africa is particularly at risk for financial crime due to its position as a regional financial hub for sub-Saharan Africa – particularly for the laundering of both domestic and foreign crime proceeds and terrorism financing. 

South Africa has also experienced extensive state capture, where businesses and politicians influence the government’s decision-making processes. 

The widespread use of cash is a high risk for money laundering and terrorist financing, including across borders. More than half of South Africa’s transactions still take place in cash. Detecting and recovering cash proceeds of crime remains a challenge for local law enforcement. 

“We need to make sure that all our regulators are on board with the way they implement the standards of care,” said the Deputy Director-General. 

“Supervisory institutions have to be up-to-speed; [the] Police and Hawks have to be up to speed; our intelligence agencies that monitor potential terrorist activities [have to be] are on board.”

The legislation to address these weaknesses is the foundation for the government’s plans to track and prosecute perpetrators of financial crimes. It’s essential for the country to put these plans in place. “It’s to build our own capability to deal with financial crimes and not just money laundering,” said Mr. Momoniat.

Implementing the legislation has become even more critical after the US Department of Treasury recently identified four individuals as suspected financiers of terrorist activities. The US Treasury stated that they were believed to be financial facilitators of the Islamic State of Iraq and Syria (ISIS) and ISIS-Mozambique. According to US government departments, ISIS associates in South Africa are playing an increasingly central role in transferring funds to branches across Africa.

To combat money laundering and the financing of terrorism, the FATF gave South Africa 18 months to deal with weaknesses it identified in the country’s law. If South Africa fails to do so, it would be greylisted by the watchdog.

This could lead to regulators in other countries restricting their transactions with South African banks and imposing fines for breaching these restrictions – something that would severely impact South Africa’s banking sector and reduce its investment potential.

“The Treasury certainly leads on the changes to the FIC Act – how banks report and so on. So we can do some things and get the legislative framework and try keep (sic) South Africa off the greylist. But the hard work in terms of investigation has to be done, still, by the Police, Hawks, and the prosecuting authorities,” Mr Momoniat told Public Sector Leaders.

Treasury’s role will be to support those institutions as we work towards a country free of financial crime. “You need that kind of dynamic ecosystem that operates and that reinforces the good.”


The Financial Intelligence Centre

Essential to the country’s fight against financial crime is the Financial Intelligence Centre (FIC), which produces operational, financial intelligence. This is used by law enforcement agencies in criminal investigations.

The FIC implements the Financial Intelligence Centre Act and aims to make the financial system intolerant to abuse. The FIC’s work includes identifying the proceeds of crime, combating money laundering, financing terrorism and the proliferation of weapons of mass destruction.