ALIKKA DAYANUND | COMPLIANCE / AML
South African banks serve as the primary gatekeepers of the national economy. Beyond managing deposits and facilitating credit, they function as intelligence-gathering entities, compliance enforcers, and the first line of defence against money laundering and terrorist financing, filing over 80% of all Suspicious Transaction Reports (STRs) received by the Financial Intelligence Centre (FIC).
Core compliance functions
Banks carry out two foundational obligations under South African law:
Customer Due Diligence (CDD): Banks must verify client identities, determine beneficial ownership and screen for Politically Exposed Persons (PEPs). Under the FIC Amendment Act, a Risk-Based Approach (RBA) allows banks to apply enhanced scrutiny to high-risk clients and transactions.
Transaction Monitoring: AI-driven systems flag irregular transactions, unusual transfers and suspected terrorist property movements in real time.
The legal framework
Banks operate within a layered regulatory framework which covers various aspects from market conduct to credit providing legislation. In terms of financial crimes, the following legislation assists banks in the fight against financial crime:
FICA (Financial Intelligence Centre Act): The cornerstone of the AML/CFT regime, establishing the FIC and imposing CDD and reporting obligations.
POCA (Prevention of Organised Crime Act): Criminalises money laundering and provides for civil asset forfeiture. Banks face legal exposure if their systems are found inadequate.
POCDATARA: Targets terrorist financing and places banks at the centre of screening and reporting obligations.
PRECCA (Prevention and Combating of Corrupt Activities Act): South Africa's main anti-corruption law makes bribery, extortion, and other forms of corruption illegal in both the public and private sectors.
State capture: a warning from history
The Zondo Commission documented the systematic looting of state-owned enterprises through politically connected networks, the Gupta network and VBS Mutual Bank among them. Banks were, in many cases, the channels through which billions in illicit funds flowed. The lesson is uncomfortable: high-level financial crime is not invisible. It leaves traces in transaction patterns, ownership structures and PEP profiles. The state capture era exposed that enhanced due diligence obligations were too often treated as administrative formalities rather than genuine intelligence exercises.
The FATF grey list and what it cost
South Africa's placement on the FATF grey list in 2023 reflected critical weaknesses in its AML and counter-terrorist financing frameworks. The consequences were swift: higher transaction costs, increased scrutiny from international banks and reduced foreign investment. The country only exited the grey list in October 2025, a stark illustration of how costly regulatory failure can be.
The deeper challenge: culture, not just compliance
South Africa's removal from the grey list is an important achievement and shows that meaningful reform is possible when government, regulators, and institutions work together. However, maintaining this progress requires an ongoing commitment to preventing financial crime. Everyone has a role to play, from employees reporting suspicious activities to business leaders promoting accountability and strong ethical practices. By making integrity a shared responsibility, South Africa can strengthen its economy, build trust, and create a more resilient financial system for the future.
Disclaimer: This article is provided for general information purposes only and does not constitute professional advice. For advice tailored to your specific circumstances, please consult a suitably qualified professional.