Malusi Gigaba. Picture: BUSINESS DAY
Malusi Gigaba. Picture: BUSINESS DAY

In another victory for SA’s institutions of democracy, accountability and governance, the Financial Intelligence Centre (FIC) Amendment Act was signed into effect by Finance Minister Malusi Gigaba on Tuesday.

The act puts in place measures, in line with international commitments, to monitor and protect the financial system from illicit money flows, such as money laundering and the financing of terrorism.

The amendment introduces into SA the concept of "prominent influential persons" (Pips), who must undergo "enhanced due diligence" when becoming a client of a bank or any other institution where large amounts of money change hands, such as when buying property.

The signing came after a lengthy delay in which President Jacob Zuma returned the bill to Parliament several months after it had been passed. This was followed by a fierce lobbying campaign by politically connected individuals — sympathetic and aligned to the president — who tried to derail the bill on the grounds that it was unconstitutional and compromised the rights of black business people.

Members of Parliament across the political spectrum saw this for what it was: an attempt to shield politically connected business people involved in dubious transactions from enhanced scrutiny or from having their bank accounts closed on suspicion of money laundering. It is no coincidence that this had just happened to SA’s first family, the Guptas.

That the amendment bill is now mostly law — albeit with the implementation of some of the more difficult sections delayed until October — is testament to the tenacity of the Treasury and Parliament’s portfolio committee on finance.

It is also due to the enormous public interest in the bill generated by the media and by nongovernmental advocacy groups such as the Council for the Advancement of the South African Constitution.

But as DA MP David Maynier warns, the fight to implement the act is not completely over. Justice Minister Michael Masutha commented rather ominously before his budget speech in May that he would like to introduce "an advisory council" for the FIC, which would have oversight over its activities and possibly appoint its director. Coming as this did after a series of strong hints and behind-the-scenes discussions in the Presidency and the Cabinet that the FIC would be more appropriately located in the security cluster of the government than in the Treasury, this was worrying.

The amendment introduces into SA the concept of  ‘prominent influential persons’

To do this, though, the FIC Act would have to be amended again. There is no provision in the current version of the act for such a committee. With Parliament including the ANC caucus increasingly cynical about the motives of the executive and with society on high alert for anything that resembles an attempt to compromise the independence of the Treasury, Masutha’s proposal won’t be easy to set in motion.

The Treasury is adamant that it has a good law to work with that will enable SA to meet all its commitments to the Financial Action Task Force, which sets the global standard. And it will be better for customers. Instead of treating all customers the same or even all Pips the same, banks and other businesses will be required to risk-rate their clients, making compliance for more low-risk customers easier and cheaper.

The Treasury says it will follow the practice of the UK in establishing "a partnership" approach. Two forums — one in the public sector and one with the private sector — will be set up to facilitate effective consultation among stakeholders.

While it should never have required a political battle of this magnitude to pass legislation giving effect to global obligations and best practice, it is nonetheless heartening that democracy and transparency have won yet again.

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