The compliance duties of commercial banks with regard to on-line money laundering

Abstract

Money laundering is defined as the manipulation of illegally acquired wealth in order to obscure its true source or nature. This is achieved by performing a series of transactions that, if successful, will leave the illegally obtained proceeds appearing as a product of legitimate transactions or investments. The expansion of the internet has made it possible to transfer money almost immediately through cyberspace. The internet is ideal for money launderers because of the speed of transacting, easy access, anonymity of the parties and the capacity to transverse countries within milliseconds. On national and international level commercial crime poses significant threat to the stability of financial systems and democratic institutions. Various bodies have joined forces to fight against the crime of money laundering. These bodies include the United Nations, the Financial Action Task Force and the Basel Committee on Banking Supervision. The Financial Intelligence Centre Act 38 of 2001 stipulates certain obligations that banks have to comply with to combat money laundering. In April 2014 South Africa s Reserve Bank (SARB) fined the country s big four banks a total of R125 million for failing to have appropriate measures in place to ensure compliance with the provisions of FICA. More recently in February 2015 SARB collectively fined Deutsche Bank and Capitec Bank a total of R15 million for breaching FICA. This dissertation aims to discuss the duties imposed by FICA on South African banks to combat money laundering and to identify the possible problems that may be hindering banks from effectively complying with their duties. Recommendations will be made on how FICA can be amended to prevent non-compliance with these provisions in the future.