Alarm: Ismail Momoniat has warned against the failure to sign into law Financial Intelligence Centre Act amendments. Picture: BUSINESS DAY
Alarm: Ismail Momoniat has warned against the failure to sign into law Financial Intelligence Centre Act amendments. Picture: BUSINESS DAY

SA will need to explain itself to the Financial Action Task Force plenary meeting in February and could be slapped with a warning for failing to sign into law amendments to the Financial Intelligence Centre Act, said Treasury deputy director-general Ismail Momoniat in an interview on Monday.

Even a mild rebuke from the task force could have significant consequences for SA, say banking industry sources, as it would raise concern among foreign regulators and banks about SA’s commitment to vigilant financial regulation. This in turn would have a ripple effect throughout the economy since correspondent relationships between banks are vital to effect payment for exports and imports.

The international task force, which monitors compliance with antiterrorism and money-laundering regulations, at its June meeting gave SA an extension from September to February to finalise the bill, failing which the organisation could issue a public statement against SA, Momoniat said.

However, it is unlikely that the bill will be on the statute books before the task force’s mid-February deadline. It was sent back to Parliament by President Jacob Zuma in November, about six months after its adoption, because of his concern about the constitutionality of its provision for warrantless searches. The standing committee on finance plans to hold public hearings on the issue when Parliament reopens on January 24 but the bill will still have to be adopted by the National Assembly and signed into law by the president.

The deadline of the February meeting looms large in the face of a warning in December by Reserve Bank deputy governor and banks registrar Kuben Naidoo that Zuma’s actions have placed SA’s banks in jeopardy.

Naidoo warned about the consequences of SA not complying with Financial Action Task Force rules in an affidavit submitted to the High Court in Pretoria about Finance Minister Pravin Gordhan’s application for a declaratory order confirming that he has no power to intervene in the relationship between banks and clients.

"SA’s failure to bring the Financial Intelligence Centre Amendment Bill into operation will likely result in a negative statement from [the task force] … which will require other member countries to re-evaluate the risks of dealing with South African financial institutions.

"This may result in foreign banks cutting off their correspondent banking relationships with South African banks," Naidoo said.

He implied that Zuma’s reasons for sending the bill back to Parliament were questionable as the amendments placed stricter limitations on warrantless searches — the reason why Zuma referred the bill back to Parliament — than did the original act passed in 2001.

"Ironically, the current version of Fica provides that all inspections under section 45B of the act will take place without a warrant. The bill, by contrast, introduces the requirement that searches must be undertaken with a warrant and only in exceptional circumstances will warrantless searches be permitted," reads the affidavit.

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