The controversial Financial Intelligence Centre (FIC) Amendment Bill – aimed at aligning South Africa with international anti-money laundering standards – was adopted for the second time by Parliament in February. It is now up to President Jacob Zuma to sign the bill into law before the next review of the global Financial Action Task Force (FATF) in June this year. Daniël Kriel, CEO of Sanlam Private Wealth (SPW), and Lawrence Jacobs, Compliance Manager at SPW, argue that failure to do so could have catastrophic results for South Africa – it will discourage foreign investment and could have an even further negative impact on our sovereign credit rating.
The FIC Amendment Bill was introduced by Treasury to bring South Africa into line with international standards for countering money laundering, illicit cross-border financial transactions and the financing of terrorism. These standards are set by the Financial Action Task Force (FATF), of which South Africa has been a member since 2003.
The bill differs from the current Financial Intelligence Centre Act (FICA) in that the amendments introduce a risk-based approach in terms of which clients of accountable institutions – including banks, wealth managers, life insurers, and to some extent the practices of financial advisers – are risk-rated and due diligence stepped up considerably in the case of clients deemed to be higher risk. This means clients won’t just be verified once in terms of FICA, but their financial affairs may be subject to ongoing due diligence and greater scrutiny by financial institutions.
Enhanced due diligence won’t just apply to politically exposed persons – the amendment bill also includes both foreign and local prominent and influential persons, which applies to those in the private sector, as well as individuals doing business with the state. The process is likely to be fairly intrusive – clients will not only need to disclose to their financial institutions their source of income and wealth, but also provide evidence of this.
Needless to say, the FIC Amendment Bill has been the subject of much controversy and heated debate. It was meant to have been ratified by Zuma before 30 July last year, but he cited concerns that it was ‘unconstitutional’ and sent it back to the legislature in November. He’s had strong support for his views, not least of which came from the security cluster, which feared the bill would usurp its powers. Mzwanele Manyi of the Progressive Professionals Forum went so far as to state that it would ‘bankrupt’ the ANC, a remark from which Deputy President Cyril Ramaphosa has since distanced his party.
To what extent the opposition to a bill that is intended to expose financial irregularities and shady transactions was an attempt at protecting vested interests, is open to debate. Those at odds with the new legislation did not win the day, however – political parties across the spectrum banded together and it was passed unanimously with minor tweaks by the National Assembly at the end of last month.
If Zuma now stalls on signing the bill, as he has in the past – the Protection of State Information Bill, for example, has been languishing on the president’s desk for years – it could have disastrous consequences for South Africa. The country will not comply with the international best practice standards set by the FATF, which will not only call into question our continued membership of this organisation but will almost certainly result in a negative review by the FATF in June this year.
This could lead to capital outflow from South Africa as both foreign and local investors will be reluctant to invest in a country without appropriate and globally accepted anti-money laundering procedures in place, where the source of wealth is not a consideration, and where individuals can essentially acquire funds illicitly.
It should also be remembered that two new exchanges have been licensed by the Financial Services Board (FSB) to begin trading this year alongside the JSE. These are ZAR X and 4AX, with other applicants currently in talks with the FSB to secure licencing. If there is reduced appetite to invest in South Africa, the chances of success for any new players in this market will be greatly diminished.
Zuma needs to ratify this important piece of legislation without delay. The bottom line is that South Africa needs to meet international best practice standards, and the current FICA Act is not up to par in this regard.
It is a matter of some urgency – the longer we tally in getting the FIC Amendment Bill signed and fast-tracking its implementation, the more the good standing of our financial institutions in the international community will be affected, casting South Africa into financial isolation and costing the country much-needed foreign investment. The million-dollar question is what priority this will now enjoy in the light of increased political infighting and jockeying for position following Zuma’s recent Cabinet reshuffle.
We can assist you with
Discretionary investment management
Sanlam Private Wealth manages a comprehensive range of multi-asset (balanced) and equity portfolios across different risk categories.
Our team of world-class professionals can design a personalised offshore investment strategy to help diversify your portfolio.
Our customised Shariah portfolios combine our investment expertise with the wisdom of an independent Shariah board comprising senior Ulama.
Outsourced investment service
We collaborate with third-party providers to offer collective investments, private equity, hedge funds and structured products.
Sanlam Private Wealth (Pty) Ltd, registration number 2000/023234/07, is a licensed Financial Services Provider (FSP 37473), a registered Credit Provider (NCRCP1867) and a member of the Johannesburg Stock Exchange (‘SPW’).
All reasonable steps have been taken to ensure that the information on this website is accurate. The information does not constitute financial advice as contemplated in terms of FAIS. Professional financial advice should always be sought before making an investment decision.
Participation in Sanlam Private Wealth Portfolios is a medium to long-term investment. The value of portfolios is subject to fluctuation and past performance is not a guide to future performance. Calculations are based on a lump sum investment with gross income reinvested on the ex-dividend date. The net of fee calculation assumes a 1.15% annual management charge and total trading costs of 1% (both inclusive of VAT) on the actual portfolio turnover. Actual investment performance will differ based on the fees applicable, the actual investment date and the date of reinvestment of income. A schedule of fees and maximum commissions is available upon request.
COLLECTIVE INVESTMENT SCHEMES
The Sanlam Group is a full member of the Association for Savings and Investment SA. Collective investment schemes are generally medium to long-term investments. Past performance is not a guide to future performance, and the value of investments / units / unit trusts may go down as well as up. A schedule of fees and charges and maximum commissions is available on request from the manager, Sanlam Collective Investments (RF) Pty Ltd, a registered and approved manager in collective investment schemes in securities (‘Manager’).
Collective investments are traded at ruling prices and can engage in borrowing and scrip lending. The manager does not provide any guarantee either with respect to the capital or the return of a portfolio. Collective investments are calculated on a net asset value basis, which is the total market value of all assets in a portfolio including any income accruals and less any deductible expenses such as audit fees, brokerage and service fees. Actual investment performance of a portfolio and an investor will differ depending on the initial fees applicable, the actual investment date, date of reinvestment of income and dividend withholding tax. Forward pricing is used.
The performance of portfolios depend on the underlying assets and variable market factors. Performance is based on NAV to NAV calculations with income reinvestments done on the ex-dividend date. Portfolios may invest in other unit trusts which levy their own fees and may result is a higher fee structure for Sanlam Private Wealth’s portfolios.
All portfolio options presented are approved collective investment schemes in terms of Collective Investment Schemes Control Act, No. 45 of 2002. Funds may from time to time invest in foreign countries and may have risks regarding liquidity, the repatriation of funds, political and macroeconomic situations, foreign exchange, tax, settlement, and the availability of information. The manager may close any portfolio to new investors in order to ensure efficient management according to applicable mandates.
The management of portfolios may be outsourced to financial services providers authorised in terms of FAIS.
TREATING CUSTOMERS FAIRLY (TCF)
As a business, Sanlam Private Wealth is committed to the principles of TCF, practicing a specific business philosophy that is based on client-centricity and treating customers fairly. Clients can be confident that TCF is central to what Sanlam Private Wealth does and can be reassured that Sanlam Private Wealth has a holistic wealth management product offering that is tailored to clients’ needs, and service that is of a professional standard.