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1 – 10 of over 4000Howard Chitimira and Sharon Munedzi
This paper explores the historical aspects of customer due diligence and related anti-money laundering measures in South Africa. Customer due diligence measures are usually…
Abstract
Purpose
This paper explores the historical aspects of customer due diligence and related anti-money laundering measures in South Africa. Customer due diligence measures are usually employed to ensure that financial institutions know their customers well by assessing them against the possible risks they might pose such as fraud, money laundering, Ponzi schemes and terrorist financing. Accordingly, customer due diligence measures enable banks and other financial institutions to assess their customers before they conclude any transactions with them. Customer due diligence measures that are utilised in South Africa include identification and verification of customer identity, keeping records of transactions concluded between customers and financial institutions, ongoing monitoring of customer account activities, reporting unusual and suspicious transactions and risk assessment programmes. The Financial Intelligence Centre Act 38 of 2001 (FICA) as amended by the Financial Intelligence Centre Amendment Act 1 of 2017 (Amendment Act) is the primary statute that provides for the adoption and use of customer due diligence measures to detect and combat money laundering in South Africa. Prior to the enactment of the FICA, several other statutes were enacted in a bid to prohibit money laundering in South Africa. Against this background, the article provides a historical overview analysis of these statutes to, inter alia, explore their adequacy and examine whether they consistently complied with the Financial Action Task Force Recommendations on the regulation of money laundering.
Design/methodology/approach
The paper provides an overview analysis of the historical aspects of the regulation and use of customer due diligence to combat money laundering in South Africa. In this regard, a qualitative research method as well as the doctrinal research method are used.
Findings
It is hoped that policymakers and other relevant persons will adopt the recommendations provided in the paper to enhance the curbing of money laundering in South Africa.
Research limitations/implications
The paper does not provide empirical research.
Practical implications
The paper is useful to all policymakers, lawyers, law students and regulatory bodies, especially, in South Africa.
Social implications
The paper advocates for the use of customer due diligence measures to curb money laundering in the South African financial markets and financial institutions.
Originality/value
The paper is original research on the South African anti-money laundering regime and the use of customer due diligence measures to curb money laundering in South Africa.
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Keywords
Howard Chitimira and Sharon Munedzi
Customer due diligence measures that are employed in the United Kingdom (UK) to detect and combat money laundering are discussed. The UK adopted a progressive regulatory and…
Abstract
Purpose
Customer due diligence measures that are employed in the United Kingdom (UK) to detect and combat money laundering are discussed. The UK adopted a progressive regulatory and enforcement framework to combat money laundering which relies, inter alia, on the use of customer due diligence measures to regulate and curb the occurrence of money laundering activities in its financial institutions and financial markets. However, other regulatory measures that could have contributed to the effective combating money laundering in the UK will not be explored in detail since the article is focused on the reliance and use of customer due diligence measures to curb money laundering activities. Accordingly, the strength, flaws and weaknesses of the UK anti-money laundering regulatory and enforcement framework are examined. Lastly, possible recommendations to address such flaws and weaknesses are provided.
Design/methodology/approach
The paper discusses customer due diligence measures that are used in the UK to detect and combat money laundering.
Findings
It is hoped that policymakers and other relevant persons will use the recommendations provided in the paper to enhance the curbing of money laundering in the UK.
Research limitations/implications
The paper does not provide empirical research.
Practical implications
The study is useful to all policymakers, lawyers, law students and regulatory bodies in the UK.
Social implications
The study seeks to curb money laundering in the UK society globally.
Originality/value
The study is original research on the use of customer due diligence measures to detect and combat money laundering in the UK.
Details
Keywords
Money laundering activities were allegedly rampant and poorly regulated in the South African financial markets and financial institutions prior to 1998. In other words, prior to…
Abstract
Purpose
Money laundering activities were allegedly rampant and poorly regulated in the South African financial markets and financial institutions prior to 1998. In other words, prior to the enactment of the Prevention of Organised Crime Act 121 of 1998 as amended (POCA), there was no statute that expressly and adequately provided for the regulation of money laundering in South Africa. Consequently, the POCA was enacted to curb organised criminal activities such as money laundering in South Africa. Thereafter, the Financial Intelligence Centre Act 38 of 2001 as amended (FICA) was enacted in a bid to, inter alia, enhance financial regulation and the combating of money laundering in the South African financial institutions and financial markets.
Design/methodology/approach
The paper provides an overview analysis of the current legislation regulating money laundering in South Africa. In this regard, prohibited offences and measures that are used to curb money laundering under each relevant statute are discussed. The paper further discusses the regulation and use of customer due diligence measures to combat money laundering activities in South Africa. Accordingly, the regulation of customer due diligence under the FICA and the Banks Act 94 of 1990 as amended (Banks Act) is provided.
Findings
It is hoped that policymakers and other relevant persons will use the recommendations provided in the paper to enhance the curbing of money laundering in South Africa.
Research limitations/implications
The paper does not provide empirical research.
Practical implications
The paper is useful to all policymakers, lawyers, law students, regulatory bodies, especially, in South Africa.
Social implications
The paper seeks to curb money laundering in the economy and society at large, especially in the South African financial markets.
Originality/value
The paper is original research on the South African anti-money laundering regime.
Details
Keywords
Howard Chitimira and Sharon Munedzi
The anti-money laundering (AML) frameworks of many countries were generally influenced by the international best practices of money laundering that were first established in 1988…
Abstract
Purpose
The anti-money laundering (AML) frameworks of many countries were generally influenced by the international best practices of money laundering that were first established in 1988 through the Basel Committee on Banking Supervision (BCBS). The general belief is that these international best practices are applicable in all jurisdictions, although most countries are still affected by money laundering. The international best practices are universal measures that were developed as a yardstick to control and curb money laundering globally. Nonetheless, international best practices for money laundering are not tailor-made for specific jurisdictions and/or countries. Therefore, it remains the duty of respective jurisdictions and/or countries to develop their own context-sensitive AML measures in accordance with international best practices. An overview of the AML international best practices that were developed and adopted by several countries are analysed in this paper. These include customer due diligence measures established by the BCBS, the financial action task force (FATF) standards, as well as the ongoing monitoring and the risk-sensitive approach that were implemented to curb money laundering globally.
Design/methodology/approach
The article analyses the AML international best practices that were developed and adopted by several countries. These include customer due diligence measures established by the BCBS, the FATF standards, as well as the ongoing monitoring and the risk-sensitive approach that were implemented to curb money laundering globally.
Findings
It is hoped that policymakers and other relevant persons will use the recommendations provided in the paper to enhance the curbing of money laundering in financial institutions globally.
Research limitations/implications
The paper does not provide empirical research.
Practical implications
The study is useful to all policymakers, lawyers, law students and regulatory bodies globally.
Social implications
The study seeks to curb money laundering in the economy and society globally.
Originality/value
The study is original research on the use of AML/counter financing of terrorism international best practices to curb money laundering activities globally.
Details
Keywords
The purpose of this paper is to determine if customers due to diligence measures laid down in Financial Action Task Force (FATF) Recommendation no. 10 can be applied to customers…
Abstract
Purpose
The purpose of this paper is to determine if customers due to diligence measures laid down in Financial Action Task Force (FATF) Recommendation no. 10 can be applied to customers of currency exchange companies.
Design/methodology/approach
Currency exchange financial entities undertake financial transactions with occasional customers, for this reason, this research work is aimed at carrying out a study of the content of FATF Recommendation no. 10 regarding the applicability of due diligence measures to occasional customers. For this purpose, the analytical and interpretative methods have been used.
Findings
FATF Recommendation No. 10 about customer due diligence measures has been designed primarily for financial entities with regular customers, however, most customers of financial currency exchange companies are occasional customers. For such financial entities, customer identification is mandatory only for transactions above 15,000 USD/EUR, leaving a potential risk of money laundering for financial transactions below that threshold. Furthermore, within currency exchange companies, risk factor analysis and customers’ identity verification are performed only on regular customers.
Originality/value
Customer due diligence measures in currency exchange financial entities should not be subject to the transaction threshold. Moreover, it is necessary to adopt a centralized control system to avoid currency exchange companies infringement of their control systems.
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This paper aims to critically examine the impact of the evolution of technology regarding customer due diligence (CDD) measures and highlight potential weaknesses in the areas of…
Abstract
Purpose
This paper aims to critically examine the impact of the evolution of technology regarding customer due diligence (CDD) measures and highlight potential weaknesses in the areas of business emerged from third parties, politically exposed persons and international clients. The paper explores whether the use of old-fashioned CDD measures can aid relevant professionals to examine whether the (potential) client is who he claims to be.
Design/methodology/approach
The paper is focused primarily on the use of important evaluation reports, in Cyprus and the UK, to identify potential flaws regarding CDD measures and the legal framework in fighting economic crime. Interviews from professionals were carried out to provide first-hand experience on relevant issues.
Findings
The view, that nowadays due to the evolution of technology, CDD is more efficient than ever, is based on solid ground. However, taking in consideration relevant reviews and reports, the paper concludes that there are significant problems and difficulties in gathering and assessing client’s information. Therefore, the use of old-fashioned due diligence measures, in appropriate circumstances, might provide a more adequate investigation for high-risk customers.
Practical implications
The paper, in contrast with a professional’s recorded opinions, uses high profile reports to prove that there is a loophole in current legal framework relating to CDD measures.
Originality/value
The paper uses two important reports from Cyprus and the UK to prove the weaknesses of current application of CDD measures. The analysis provided in the paper can be used to persuade professionals that there is space for the use of old-fashioned CDD.
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William Gaviyau and Athenia Bongani Sibindi
The purpose of this study is to examine the South African banks’ customer due diligence (CDD) practices in the fintech era to mitigate money laundering (ML) risks and ensure…
Abstract
Purpose
The purpose of this study is to examine the South African banks’ customer due diligence (CDD) practices in the fintech era to mitigate money laundering (ML) risks and ensure financial stability. Financial technologies have brought substantial transformations to the financial services sector. However, such technologies have exposed the sector to emerging risks that threaten the integrity and stability of the financial system globally. Before any bank–customer relationship is established, proper customer background checks must be conducted. These background checks enable financial institutions to validate information provided and ensure customers are properly risk profiled. Failure to risk profile customers could result in financial institutions being used as conduits for ML. Undoubtedly, CDD procedures are pivotal to overall anti-money laundering efforts and curbing financing terrorism in a regulatory framework.
Design/methodology/approach
A qualitative research approach was adopted to address the research questions of the study. Given the confidentiality associated with the financial services sector, data triangulation was used in blending mainly secondary and primary data sources. Secondary data sources used in the study were published reports available in the public domain that were corroborated with subject matter experts’ interviews.
Findings
Based on the findings of this study, it is concluded that in South Africa, technological solutions have been incorporated into CDD functions, which is now risk-based (enhanced due diligence). Also, legally, South Africa has incorporated the biometrics, integration with Department of Home Affairs and Companies and Intellectual Property Commission databases, customer consent to third-party sources with the Financial Intelligence Centre Act and the Protection of Personal Information Act.
Originality/value
The shift towards digital banking in South Africa results in increased data and dynamic risk profiling. This study advocates a policy shift requiring a risk-based approach to mitigating emerging ML risks (in particular digital laundering), especially in the wake of South Africa’s recent greylisting by the Financial Action Task Force.
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The purpose of this paper is to systematically introduce the latest documents of customer due diligence (CDD) issued by international organizations and developed countries, and to…
Abstract
Purpose
The purpose of this paper is to systematically introduce the latest documents of customer due diligence (CDD) issued by international organizations and developed countries, and to examine practice of CDD in China.
Design/methodology/approach
This paper reviews the latest regulations and guidelines of CDD at international level, and critically examines the practice on CDD compliance in China.
Findings
Although China has developed series of provisions concerning CDD since 2007 to response the international requirement set by Financial Action Task Force, the practical compliance still has long way to improve.
Originality/value
This paper usefully highlights the difference between Chinese practice and international standards, and proposes institutional reforms on CDD compliance in Chinese financial sectors.
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The purpose of this paper is to explore the relationship between anti‐money laundering (“AML”) and combating of financing of terrorism (“CFT”) customer due diligence (“CDD”…
Abstract
Purpose
The purpose of this paper is to explore the relationship between anti‐money laundering (“AML”) and combating of financing of terrorism (“CFT”) customer due diligence (“CDD”) measures in the financial services industry, and exclusion from financial services.
Design/methodology/approach
An introduction to the concept of financial exclusion is provided as well as an overview of international AML/CFT CDD standards. The paper highlights a softening of national CDD measures in South Africa and the UK to lessen the impact on financial exclusion.
Findings
Countries should consider the impact that CDD requirements may have on financial exclusion when they design their AML/CFT systems.
Research limitations/implications
Multi‐discilinary research is required to improve the understanding of the broader interaction between AML/CFT objectives, financial exclusion and economic development, especially in countries with a large informal economy.
Practical implications
CDD requirements may unnecessarily exacerbate financial exclusion if they are not formulated with care to reflect the reality of the particular country setting.
Originality/value
The paper offers insights into the international standards resulting to the identification of clients and the experiences in the UK and South Africa regarding the implementation of these standards on financial exclusion.
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This paper aims to address the money laundering risk posed by politically exposed person’s (PEP’s) controlled legal entities. International standards and national legislation…
Abstract
Purpose
This paper aims to address the money laundering risk posed by politically exposed person’s (PEP’s) controlled legal entities. International standards and national legislation require enhanced due diligence of political office holders but no specific requirements exist on entities controlled by PEPs. While regulators expect the stringent AML risk mitigation regarding this type of entities, financial institutions have no guidelines to follow. This gap produces inconsistent due diligence measures applied to entities with significant PEPs’ connection.
Design/methodology/approach
The paper uses comparative analysis to identify discrepancies between legal requirements and their interpretation. Moreover, an empirical approach results in a standardised solution to address these discrepancies.
Findings
The paper defines the concept of politically exposed entities and the applicable due diligence framework. Anticipating legislative measures, it proposes to introduce this concept via best practices of financial institutions and private banking initiatives such as the Wolfsberg Group.
Research limitations/implications
The research addresses the topic from a legal point of view. However, the implementation of proposed ideas depends on decisions which are political by nature and are not within the scope of this paper.
Practical implications
The paper aims at stimulating a debate in both the private and public sector to form a consistent approach to AML due diligence of legal entities associated to PEPs.
Originality/value
This paper responds to an identified need to study how legal entities connected to PEPs should be defined and monitored.
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