Fortifying a risk-based approach in the South African AML/CFT process
| Date | 02 October 2017 |
| DOI | https://doi.org/10.1108/JFC-01-2017-0007 |
| Published date | 02 October 2017 |
| Pages | 520-528 |
| Author | Johan Henning,Mignon Hauman |
| Subject Matter | Accounting & Finance,Financial risk/company failure,Financial crime |
Fortifying a risk-based approach
in the South African
AML/CFT process
Johan Henning
Dean’sOffice, University of the Free State,
Bloemfontein, South Africa, and
Mignon Hauman
Department of Mercantile Law, Faculty of Law,
University of the Free State, Bloemfontein, South Africa
Abstract
Purpose –The purpose of this paper is evaluate the provisions of Financial Intelligence Centre Act
Amendment Bill, 2016 which intends to give effect to the implementation of the envisioned risk-based
approach in anti-money laundering/combating financing of terrorism (AML/CFT) processes, as well as the
extent to which the provisionsaddress certain technical shortcomings elucidated in 2009 MutualEvaluation
Report concerningSouth Africa’s AML/CFT’s framework.
Design/methodology/approach –Sources of information consisted of scholarly articles, articles
retrieved from the Web, news reports, reports published by national and international regulatory bodies,
legislationand draft legislation.
Findings –Findings suggest that the South African legislature not only addresses the particular
shortcomings specifically highlighted in the 2009 Mutual Evaluation Report comprised by the Financial
Action Task Force but also requires the establishment of a framework for the realisation of a risk-based
approachedin every “risk”scenario and on an on-going basis.
Practical implications –Accountable institutions will be required to establish and implement a Risk
Management and Compliance Program which must provide both the framework and the strategy for the
execution of the risk-based approach when establishing a business relationship, during the course of
administrating the businessrelationship as well as when concluding any single transactionin pursuit of the
businessrelationship.
Originality/value –This paper serves to alert accountable institutions, compliance and corporate
governance professionals and AML and counter-terrorist financing practitioners of the risk-based approach
South African accountableinstitutions will be obliged to implement in their AML/CFT processes, theextent
to which a risk-basedapproach must be incorporated and the aspects that mustbe provided for in terms of the
mandated Risk Management and Compliance Program once the Financial Intelligence Centre Act
AmendmentBill, 2016 is signed into law.
Keywords South Africa, Anti-money laundering, Risk-based approach, Client due diligence,
Counter-terrorist financing, Financial intelligence centre amendment bill
Paper type General review
Introduction
In 2012, the Financial Action Task Force (FATF) (2012)published international anti-money
laundering (AML) and counter-terrorist financing standards which introduced the
implementation of a “risk-based”approach in the execution of AML and combating
financing of terrorism (CFT) measures (FATF Recommendations, 2012 updated 2016).
JFC
24,4
520
Journalof Financial Crime
Vol.24 No. 4, 2017
pp. 520-528
© Emerald Publishing Limited
1359-0790
DOI 10.1108/JFC-01-2017-0007
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