SA must decode
financial crime

South Africa’s financial sector faces an Anti-Money Laundering compliance crisis, with authorities cracking the whip on institutions that fail to meet their obligations to combat financial crime and the country’s continued presence on the Financial Action Task Force (FATF) grey list, adding to the cost of doing business.

That’s according to Bradley Elliott, CEO at RelyComply, who says recent developments highlight that traditional approaches to Anti-Money Laundering (AML) and know-your-customer (KYC) are no longer good enough. “We’re seeing the South African Revenue Service (SARS) getting involved in holding companies liable for damages in tax evasion due to AML deficiencies, such as in the recent Sasfin case,” he says.

“These liabilities go beyond a fine for which companies can make provisions – in the worst case, claims could be severe enough to bankrupt a business. In addition, it has become clear that South Africa faces at least another year on the FATF’s grey list due to slow progress in reforming AML measures.”

Against this backdrop, it has become urgent for South Africa’s financial sector to strengthen AML initiatives, not only to safeguard the reputation and sustainability of each business but also to elevate trust in the country’s overall financial system. This is key for simplifying red tape for local institutions as well as attracting inbound investment into South Africa.

RelyComply’s analysis of major South African AML cases identifies consistent weaknesses that companies should address, including inadequate customer due diligence processes to uncover ultimate beneficial ownership or fully assess customer risk; deficient transaction monitoring systems that miss suspicious activity; and under-staffed and under-skilled AML compliance teams.

_{Bradley Elliott, CEO at RelyComply}

One of the key pillars of a financial services ecosystem that can effectively combat financial crime is the effective sharing of information within and between different organisations. “Financial crime isn’t just a matter for risk and compliance departments – it should be a board-level imperative,” says Brad.

“Financial crime and regulation are constantly evolving, so AML process and systems should, too,” says Brad. “It’s not enough for companies to work in silos anymore, nor will manual checks meet the grade. We need an ecosystem of compliant institutions that balances technologies like artificial intelligence (AI) and machine learning with people to combat money laundering effectively.”

Financial institutions can leverage regulatory technology (RegTech) to automate compliance processes and strengthen AML defences. This includes using matching-algorithms for sanctions and PEPs risk upon onboarding, validating customer identities through multiple data sources, and leveraging AI and machine learning accurately to monitor transactions for suspicious patterns or behaviour.

With an end-to-end platform covering each task within AML procedures, the risks of suspicious transactional behaviour are reduced, and businesses can stay one step ahead of the fincrime underworld. Regulation may shift accordingly, but so can the modern monitoring and compliance system.