General Laws (Anti-Money Laundering and Combating Terrorism Financing) Amendment Bill: deliberations

NCOP Finance

07 December 2022
Chairperson: Mr Y Carrim (ANC, KZN)
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Meeting Summary


The Select Committee in Finance met for an informal processing and clause by clause deliberation of the General Laws (Anti-Money Laundering and Combating Terrorism Financing) Amendment Bill (B 18B-2022).

National Treasury explained the amendments to each clause and Members asked clarity-seeking questions and made input where necessary.

Members asked about the jurisdiction of the regulations, beneficial ownership, the application of the Bill to Non-Profit Organisations, and general questions about proliferation financing.

Members appreciated the amendments and believed that they were sufficient to meet the Committee’s concerns. Members felt that implementation is going to be key to the success of this Bill and that the Bill is a positive step to ensure that South Africa remains in compliance with its international objectives and avoid a possible blacklisting. Members also felt that the Bill will help the state tackle corruption, tax evasion, money laundering, terrorism financing only if it is well implemented.

The Committee planned to vote on the Bill at its next meeting on Friday.

Meeting report

The Chairperson welcomed the Committee and noted that there were no apologies.

The Chairperson asked if the members of the different political parties present wanted to comment on the policy issues in the General Laws (Anti-Money Laundering and Combating Terrorism Financing) Amendment Bill (GLAB).

Members of the Democratic Alliance, Freedom Front Plus and the Economic Freedom Fighters stated that they had nothing to say yet.

Ms M Mamaregane (ANC, Limpopo) stated that the ANC supports this Bill.

Before moving on to clause by clause, he asked if civil society had anything to add.

There were no comments.

The Chairperson asked National Treasury to take Members through the Bill.

Clause by clause processing of GLAB

Long Title

Ms Jeannine Bednar-Giyose, Director: Fiscal and Intergovernmental Legislation, National Treasury, stated that there are a few amendments to the long title to align it to the content that was added through amendments and additional provisions to the tabled version of the Bill that were considered and adopted in the National Assembly.

The Chairperson encouraged the staff and technical experts to speak up in the meeting and intervene as the Committee is going through the Bill, especially if there is an inconsistency or omission.

Clause 1

Clause one makes amendments to the Trust Property Control Act (TPCA). This clause introduces the definition of accountable institution and beneficial owner. The definition of beneficial owner was refined during the process in line with the submissions that were received on the definition, which was helpful.

The Chairperson stated that beneficial ownership is addressed in the Financial Sector Regulation Act. It seems likely that the Committee will vote on Friday. The staff is reminded that they are to come back to the Committee by tomorrow night to let the Committee know whether everything is how it should be.

Adv Frank Jenkins, Senior Parliamentary Legal Advisor, Constitutional and Legal Services Office, stated that he will also assist in this regard.

Ms Bednar-Giyose stated that with beneficial owner, definitions have been inserted in the TPCA, the Companies Act, and the Financial Sector Regulation Act. This is to ensure that there is a definition for beneficial owner that is appropriate for the legislation that addresses the particular persons and entities that are regulated by that legislation so that who is a beneficial owner can be appropriately determined in each of the pieces of legislation. The persons who are regulated by the TPCA are different from those controlled by the Companies Act.

The Chairperson said he remembers now and stated that part of this was raised in 2017. This is an all embracing Bill. He asked whether members want to add anything before the Committee moves to the next clause.

Ms Jenny Wright, Representative, NPO Working Group, stated that beneficial ownership in the non-profit sector needs to carefully take into account that there is no owner and that the correct people who are responsible for directing where the money goes effectively and controlling it need to be properly incorporated into the definitions because you do not want it to be the Chief Executive Officer of the organisation if they are doing the day to day but are not overall in charge of the finances and the oversight. It has been a problem with some of the definitions at present because it is not something that the managing committee needs to be given their details. The voluntary association issue is something that gets forgotten.

Mr D Ryder (DA, Gauteng) asked whether the jurisdiction of the regulations is stipulated in each of the bills or is there somewhere where the Committee would need to put some sort of comment about jurisdiction? Jurisdiction becomes more and more important as the Committee deals with financial transactions in terms of determining where a transaction is to be regulated. Certainly as one deals with these multinational transactions, the factors can be argued whether the jurisdiction is in the country that is receiving or in the country that is sending.

The Chairperson stated that this is a fundamental point but this issues have been dealt with to some extent with Steinhoff.

Ms Bednar-Giyose replied that the regulations that are referred to in the Bill would be issued in terms of each of the principal acts that are being amended. The regulation will be issued by each respective Minister that is responsible for that legislation. For example, PCA is the Minister of Justice and NPO Act it is the Minister of social Development. The regulations will be issued in accordance with the provisions relating to making regulations in terms of the different acts. We have provided that some of the specific regulations, especially relating to the information and the registers in the different acts would be issued by the Minister responsible for that legislation in consultation with the Minister of Finance and the financial intelligence centre.

The Chairperson stated that one of the functions of this exchange is that the newer members do not have the advantage of experience that the older members have. It is not fair on them. One of the reasons for this discussion is that it is a good point but also to get newer members to learn and grow from these experiences too. Sometimes when he asks a question it is less because he wants an answer as much as he wants it exposed to other members. Even then, he finds that he learns and grows. In other such multidisciplinary bills can we not also say that the Minister responsible for the implementation of a particular bill can also pass regulations provided they do it in consultation with the relevant Minister under whose portfolio the original clause was meant to be implemented. Is that not also another option? “I think we have had that before but am I wrong?”

Ms Bednar-Giyose replied that it could potentially be another option. National Treasury does not generally amend legislation that falls under the ambit of other Ministers. In this instance, recognising the responsibilities of the Ministers would be adequate and still provide for appropriate alignment and coordination. It could have said “In consultation with” instead of “after consultation with” but that would have required absolute concurrence. In this instance, it was proposed, just to ensure that the Minister of Finance is informed and has an opportunity to comment on the regulations it would ensure that the Minister and the Financial Intelligence Centre were consulted before the regulation was made.

The Chairperson stated that he believes that that was the correct thing to do, especially seeing that it was done in a rush. You have to have the other Minister do it. You have an experience that is the other way around where the Minister of Finance would pass the regulations in terms of this Act when it becomes an Act but in consultation with the relevant Minister. Is that not what we have done? In a previous era, chairpersons were brought in over disputes between ministers and departments. He asked Adv Jenkins whether he has come across an experience where the latter case, the opposite of what they have done here, has happened? Can that be done?

Adv Jenkins lost connection and was not able to respond.

The Chairperson recalled that they when they dealt with the local government legislation and justice bills, they had to deal with many other portfolios. What would happen there is that there was this option that Treasury has gone for and the other option of the relevant Minister whose department brought the bill saying that they will do it in consultation with the other minister under whose territory that particular clause falls under.

Ms Bednar-Giyose stated that National Treasury notes the comments made especially in regard to the definition of “office bearer” in the NPO Act. This is something that will be looked into after the amendment process. National Treasury has not inserted an actual definition of “beneficial owner” in the NPO Act. National Treasury recognises that NPOs do not have owners. However, that will be further considered in the NPO Act Amendment process.

The Chairperson asked Ms Bednar-Giyose whether she agrees with Ms Wright.

Ms Bednar-Giyose replied that careful attention should be given to how some of these terms are defined. Further attention will be given to those aspects in the subsequent processes.

The Chairperson stated that a fair question would be why she would require the Committee to get to the penultimate stages of the process in this Bill and you get the question raised. Was this not raised in the National Assembly process? If it was raised, why did you not pay attention there?

Ms Bednar-Giyose replied that the submissions did indicate that there needs to be careful analysis of how there would be appropriate amendments to address these aspects and it also did not necessarily only relate to amendments in the NPO Act, it also involved proposals relating to amendments to the Companies Act and so the colleagues in the response to the submissions did indicate that at this stage they thought that it would be appropriate to give further consideration in the subsequent Companies Act Amendment Bill process. National Treasury had indicated in the response documents that it thought that these processes would have to be further analysed and addressed potentially through the NPO Amendment Bill process and maybe the Companies Act Amendment Bill process.

The Chairperson suggested that Ms Bednar-Giyose reply with two or three lines to what Ms Wright said. Esther and the team can write it down. The Committee can do this when it reviews the progress on the Bill. We have to do this, we cannot say we are going to do things and not do it. He asked Nkululeko to put down the decisions the Committee said they will follow up on this year and then do it in the first quarter of the year. The National Council of Provinces (NCOP) must hold itself accountable the same way it does to the Executive. In the second quarter of next year, the Committee must call the department and civil society back and they can give the Committee their perspective sides. He alerted civil society organisations that the Committee is not going to allow them to speak during the formal processing of the bill on Friday. Civil society cannot co-govern. The Committee is going far with civil society for this Bill because the Bill has come late and it is crucially important. He is not an expert. He alerted to previous experience processing the Child Justice Act that was jointly with civil society. He does not romanticise NGO’s they have a lot to answer for to the people they serve. This is not a process just to please NGO’s. Let us not be afraid of NGO’s, the Committee can learn from NGOs. The ANC spoke of “a people’s tribune” and “a people’s Parliament” when they came to power in 1994. Parliament must engage with civil society and take them on too. This is civil society’s Parliament as much as it is parliamentarians’ Parliament. He is stating this because he wants to communicate with civil society and alert his own party that they must not be afraid of civil society. Civil society cannot co-govern. They are narrowly focused on their issues without talking about trade-offs but they must fully participate. Civil society is alert. When we end today, unless something comes up, you must have it in writing, we will have a formal process on Friday, civil society will be given a short slot before the process begins, then the Committee goes ahead. It will be a mechanical process.

Clause 2

Clause two amends section 6 of the TPCA and provides grounds for disqualification of persons being appointed as or acting as trustees. A similar provision has been added in the Non-Profit Organisation Act. Section 69 of the Companies Act has also been amended which provides grounds for disqualification of persons as directors. It includes grounds for disqualification for persons who are convicted of offences relating to terrorism activities and money laundering activities, and persons who are subject to sanctions under the United Nations. This is important for ensuring that fit proper persons are appointed as trustees of trusts and subsequently in a similar provision for non-profit organisations, as office bearers of non-profit organisations and directors of companies.

There were no comments or questions.

Clause 3

Clause three amends section 8 of the TPCA to clarify that a person outside of the republic of South Africa would only be able to be appointed as a trustee and act as a trustee if the master has specifically provided authorisation. It has been highlighted in submissions that it was not clear that foreign trustees would be subject to the regulations under the Act and subject to the various obligations of the trustees so it was proposed that it be clarified.

There were no comments or questions.

Clause 4

Clause four amends section 10 of the Act. It requires trustees to disclose that they are trustees when they are engaging with accountable institutions as defined by the FIC Act and make it known to accountable institutions that the transaction involved relates to trust property. This is important to ensure that certain transactions relating to trusts are properly highlighted and monitored.

There were no comments or questions.

Clause 5

Clause five amends section 11 of the TPCA to require that prescribed details regarding accountable institutions that the trustee uses as agent to perform functions as a trustee are recorded. These prescribed requirements would be set by the Minister of Justice after having consulted the Minister of Finance and the Financial Intelligence Centre.

There were no comments or questions.

Clause 6

Clause six requires trustees to establish a record of beneficial owners of the trust and record the prescribed information regarding the trust and provide a register of that information to the Master’s office and ensure that that information is updated. The Master must in turn keep a register of the beneficial ownership information relating to trusts. The Master’s office must maintain that register and will be required to make information contained in that register available in accordance with what will be provided in regulations. Regulations will stipulate in more detail who may have access to the information and how that will be provided.

The Chairperson asked what the substantial differences are between what is here and what has been here in terms of beneficial ownership? How many of the clauses that we have here are in the original Act? What is new and why is it new?

Ms Bednar-Giyose explained that this clause has not been amended from the tabled version of the Bill. However, it is an important clause in the Bill because currently in the TPCA there is no requirement requiring beneficial ownership to be obtained by trustees and also for a register to be maintained by the master. This is an important provision in the bill but it has not been amended compared to what was in the tabled version of the bill that was originally before the National Assembly.

The Chairperson stated that this was not his question. This is being put in the TPCA. The requirements for beneficial ownership have expanded since this Act was in place. The provisions that are inserted here have not been amended from the time they were introduced to Parliament. His question was whether the wording of this amendment was taken from an existing Act or was this wording being introduced for the first time?

Ms Bednar-Giyose replied that there is currently a register under the TPCA but it has not dealt with beneficial ownership. This is a new section to address that. Beneficial ownership information has not been specifically addressed. Beneficial ownership information has not been previously provided for in the legislation in South Africa. That is why it is being introduced in the TPCA and the NPO Act.

The Chairperson stated that his understanding is that this whole thing is new and has not been amended from any other Act. Until now, we have not had the amendments that are being put forward in any existing act.

Ms Bednar-Giyose replied that this is correct.

The Chairperson thought this came from another Act.

Ms Bednar-Giyose explained that the Financial Sector Regulation Act (FSRA) also dealt with significant ownership of financial sector institutions. Even there it did not specifically refer to beneficial ownership. We are actually including a definition in the financial sector regulation act and empowering standards and directives issued specifically in relation to beneficial ownership. Beneficial ownership is an issue that has particularly come to the fore in quite recent years, especially in light of all the developments with Financial Action Task Force (FATF). This is why it is important to update the legislation to ensure that now and going forward we are able to appropriately understand beneficial ownership and collect relevant information and empower appropriate regulation in relation to beneficial ownership.

The Chairperson stated that beneficial ownership caused a lot of tension between the Committee and a section of society whom the Committee needs to address the needs of. A lot of lobbying took place around this. Beneficial ownership was one aspect of the FSRA and later the FIC Amendment Act in different forms that caused a lot of issues. He had to do a lot of reading and consulted on this. Beneficial ownership was quite a key issue from different sides arguing for and against it. This is a critically loaded concept, not just a technical one. He is surprised that in the National Assembly process this time around, it has just somehow fallen away.

Clause 7

Clause seven of the Bill replaces an obligation on the trustees to comply with some of these requirements relating to the collecting and reporting of the information that are noted in the above provisions. It would make contravening these obligations into an offence. It highlights that ensuring that these obligations are fulfilled is a very important aspect of the responsibilities of trustees.

There were no comments or questions.

Clause 8

Clause eight of the Bill amends section 20 to provide that the trustee could be declared to not be a fit and proper person to continue as a trustee in certain instances and could be removed from office. If they become a disqualified person for the grounds listed in section 1A that is being inserted they would not be able to continue to act as trustees and could be removed from office.

There were no comments or questions.

Clause 9

Clause nine amends section 2 of the Non-Profit Organisations Act so as to change the wording in the section to reflect that some non-profit organisations are now required to be registered. This would be completely voluntary registration. It was identified that it would be appropriate to register non-profit organisations as those are the entities that would be required to comply.

Mr Ryder asked what happens with foreign domiciled NPOs that are operating in the South African space. There is not a lot of this happening but there certainly are a few NPOs operating in South Africa that are moving funds forwards and backwards. Some of the NPOs do have South African banking accounts. Are there also eyes on these? Do they have to register specifically with us?

Ms Bednar-Giyose replied that in terms of section 12, as it will be amended, if the non-profit organisation does fall under in its activities, if it falls under what is referred to in paragraph B, if it is operating in South Africa but is making donations to entities and individuals outside of South Africa or of it is operating in South Africa and provides humanitarian, charitable, religious, educational or cultural services outside of South Africa it might potentially fall under the ambit of the Act. That would depend on the particular foreign non-profit organisation and how it may be operating within South Africa. If there are these transactions that would be moving from South Africa to outside the country. Depending on the particular circumstances, they might end up falling under paragraph B although we have not specifically referred to the foreign non-profit organisations or whether or not they are actually conducting the specific types of transactions and providing services that are referred to in paragraph B. That would determine whether or not a particular foreign non-profit organisation might or might not find themselves falling under the ambit of needing to register. Non-profits were referred to in the tabled version of the Bill.  The focus now is on non-profits that are conducting activities specified in section 12B.

Ms Ann Brown, NGOLaw, commented that foreign non-profit organisations have to register under the Companies Act as an NPC. Very often they will have to register under the NPO Act too. The Committee does have the foreign organisations covered.

Ms Bednar-Giyose replied that Ms Brown has more experience with foreign non-profit organisations She expects what Ms Brown has advised to be correct.

Clause 10

Clause ten of the Bill amends section 5 of the Non-profit Organisations Act. It has been included to enable the non-profit organisations to be able to enter into arrangements and for coordination, collaboration, cooperation with other organs of state that might assist the directorate to fulfil its functions and duties under the NPO Act, including those that might relate to the maintenance of the information register and any activities of the directorate that it needs to perform. This was included in the tabled and the amendments that were proposed in the national assembly have been added. We have adopted that specific administrative functions could be delegated by the directorate to another organ of state. This will hopefully provide a mechanism for the directorate to be able to enter into arrangements to support it to fulfil its mandate and function.

There were no comments or questions.

Clause 11

Clause 11 is a very important section about the registration of the non-profit organisations. This was quite significantly amended in the national assembly in response to the submissions so that there is not a reference to licensing requirements being prescribed. The licensing requirements would be objective requirements that are set out in the processing referred to in sections 13, 14, and 15 of the Act. This was in response to the opinion from senior council that was discussed in previous meetings. In paragraph B we mentioned the scope of non-profit organisations that would require to be register would be significantly reduced in line with submissions that were made during the National Assembly process. It is notable in paragraph (d) a new subsection 4 has been added that would make it clear that a non-profit organisation would only be required by the directorate to make amendments to its constitution only if it was determined that the constitution did not address all the required matters that are required in terms of section 12(2). This was clearly included to specify the limited ground on which the directorate can require amendments to be made to the non-profit organisation’s constitution.

Mr Ryder stated that this is the clause that is causing a little bit of discomfort at this stage because of the amendments that came at the end. While there have been responses from NPOs, there has not been many from accountable institutions. It would have been interesting to see their input. It is a pity that the banks are not included and it seems that they do not include themselves in the Committee processes for some reason. We are placing some compliance requirements on them. I presume that the big trigger to bring about a test on whether an NPO has been registered will come about when there is an application to do a foreign transfer and to transfer funds backwards and forwards. That is something that has obviously been crystallised by the amendment that has been made at the end of the process. The question is how will an entity that is registered according to this will be identified? Will there be a certification process by the Department? He presumes that there will be a need for an accountable institution to verify that certificate or receive that certificate. Will these certificates have an expiry date? Will they have a limited validity period? We are placing a burden of compliance on them? How will they achieve that? He is not sure whether it needs to be detailed in the Bill. Will it be detailed in some regulation that will be amended to the Bill as a result of this?

Ms Bednar-Giyose replied that these provisions specifically relate to the non-profit organisations. It does not refer to accountable institutions. It can be noted that there may be aspects in respect of the implementation that have been highlighted that would be relevant for specifying for primary legislation. However, those can be noted for being important for consideration in the implementation. The Financial Intelligence Centre colleagues can certainly take note as National Treasury engages with the Department of Social Development on the implementation that these sort of practical aspects would be considered and appropriately addressed and provided for in the implementation. There will not be regulations relating to the actual registration in terms of the NPO Act. The registration processes will be specified in the Act. There may be certain practical aspects that will be relevant for the DSD and the FIC to engage on and consider.

The Chairperson said that Mr Ryder made a good point.

Clause 12

Clause 12 of the Bill amends section 13 of the NPO Act. It has been included in the Bill in response to comments that were provided in the standing committee to clarify that the director has the ability to refuse to register a non-profit organisation if in fact the applicant has not complied with the requirements for registration that are set out in section 12 or has not complied with a notice where the director has advised the applicant that there are requirements that have not been complied with in section 12 and given them an opportunity to satisfy those requirements. The director can refuse to register an NPO on any grounds, including that the directorate does not approve of any activities of the NPO. This is to ensure that the powers to refuse registration are limited. This limits the impact on the right to freedom of association and religious rights. This was in response to submissions raising concern about negative impacts to the rights to freedom of association and religion.

The Chairperson stated there was quite a bit of objections from religious organisations. How did the Committee deal with this? The religious sector is an important sector of our society given the overall moral degeneration of the country. The views of genuine religious people need to be taken more seriously. The Committee needs to put something in its report about this. What were the religious groups upset about during the NA process and to what extent are they satisfied?

Ms Bednar-Giyose replied that among the submissions sent to the standing committee, there were concerns expressed that potentially the directorate of non-profit organisations when considering whether or not to register non-profit organisations or maybe whether a non-profit organisation should be deregistered, there might be a potential for these powers to be exercised in a manner that could infringe on constitutional rights and religious communities. Those submissions were very carefully considered. The legal opinion obtained from senior looked into this. The actual grounds that exist in the NPO Act are quite limited. The only grounds on which the constitution can be required to be amended are in relation to whether the constitution does not in fact address all of the matters that are required to be addressed in the constitution of a NPO. The Act already had limited and defined scope of powers for directors. In order to provide some comfort, it was proposed that these be made more explicit in the provisions. That is why subsections seven and eight have been added in relation to registration.

The Chairperson stated that while it is the staff’s responsibility to capture accurately and the NPOs’ responsibility to send their summaries so that the Committee can fit them into a reasonable space. What the Committee could do is if a member wants a short summary of the outstanding issues then they can send it to the staff because they cover that. The recommendations and some of the observations are the Committee’s responsibility not just the Chairperson’s. Should the Committee not add something here about the matters raised by Ms Bednar-Giyose?

On the accountable institutions issue raised by Mr Ryder, he stated that parliamentary monitoring people used to attend meetings and they would meet with the Chairperson. They are very good at monitoring. They are vigorous at lobbying. The fact that they are not here suggests that they are cool.

The Chairperson noted that there was no objection.

Clause 13

Section 18 of the Non-profit Organisation Act requires certain information about office bearers, control structures, governance administration and operations of NPOs to be compiled and included in the register. There will then be prescribed regulations that will be set out in more detail what information needs to be provided. The NPOs must ensure that the information that they are required to obtain and provide to the directorate is kept up to date.

There were no comments or questions.

Clause 14

Clause 14 amends section 24 and it provides the information that must be submitted and included in the register that will be maintained by the directorate of non-profit organisation. It is very similar to section 18 of the Non-profit Organisation.

There were no comments or questions.

Clause 15

Clause 15 provides for potential removal and disqualification of office bearers of NPOs. It is based on section 69 of the Companies Act and sets out grounds on which a person would not be appointed as or continue to act as an office bearer of an NPO. This would include the commission of offences relating to terrorist activities corruption and money laundering, as well as person who would be subject to sanctions by the United Nations.

The Chairperson observed it was striking how much of what regulates NPOs is to be found in the Companies Act.

Clause 16

Clause 16 amends section 21 of the NPO Act so as to clarify the limited grounds on which the director might cancel the registration of the non-profit organisation. That is only for the objective non-compliance with the Act or the NPOs constitution. This clearly states that powers of the director to deregister non-profit organisations.

There were no comments or questions.

Clause 17

Clause 17 amends section 29 of the Non-profit organisation Act. Non-compliance with the requirements in section 12 and the reporting requirements in section 18 would be an offence in the tabled version of the Bill. However, in light of the submissions that were made, the standing committee, it will now just be provided that it will be contraventions that will be potentially subject to administrative sanctions.

There were no comments or questions.

Clause 18

Clause 18 amends section 1 of the Financial Intelligence Sector Act (FICA) so as to change references from “organ of state” to “national department”. It includes references to the auditor-general. It also amends the definition of beneficial owner that is currently provided in the FICA so as to better align it with the adjustments that have been made at FATF level for how beneficial owners should be assessed and defined. Although this has not been adjusted in the parliamentary process, this definition is as contained in the tabled version of the Bill. There are amendments to change references to “domestic prominent influential persons” to “domestic politically exposed persons”, and “foreign prominent public official” to “foreign politically exposed persons”.

The Chairperson asked what is the policy that underpins the change of the terms. The terms were there in the FSRA and the terms are now being made consistent across all the bills. Or is the term also being changed in the FSRA?

Ms Bednar-Giyose explained that these terms are not used in the FSRA per se but are used in the FIC Act. Her understanding is that it is proposed to change the term referencing in order to align more appropriately with how the terms are used and referred to on the international level.

Ms Provindree Naidoo, Senior Legal and Policy Advisor, Financial Intelligence Centre, stated that definition needed to be changed to align more with how it is used internationally and how the schedules that deal with politically exposed persons have now been structured. A broader term like a domestic prominent influential persons was initially needed to be used because the private sector was also included within the schedule of persons who fall under the definition of a prominent person. We could not use the term politically exposed persons when the private sector is being referred to. There is a second schedule dealing with the private sector where companies that receive tenders from government or organs of state will fall within a certain category. The term “politically exposed persons” can be used when persons in public positions are being referred to.

Ms Bednar-Giyose continued with the clause. She stated that it was determined that using “investigative decisions in a national department” was a more appropriate way to refer to where the relevant investigative divisions are situated as well as where the auditor-general’s office. They are being recognised as an important entity in terms of the FICA. The clause includes the definition of “proliferation financing” which is a new term introduced in the Act and a new area of international concern.

The Chairperson asked for an explanation of the definition of “proliferation financing”.

Ms Bednar-Giyose explained that proliferation financing are types of activities which are engaged in to provide support to entities or actors but can ultimately further be used to promote the procurement of weapons, manufacturing weapons, and other types of material that can then be used in terrorism related activities which imposes an important threat. It is economic support and services that could ultimately promote the proliferation of weapons that have destabilising impacts for global and domestic security. This is an important category that has been identified and needs to be appropriately identified, monitored, and catered for in the legislation.

Clause 19

Clause 19 amends section 3 of the FICA to provide certain other objectives for the FIC including the identification of persons involved in money laundering activities and offences. The amendment also includes references to proliferation financing activities as an important objective. The amendment is also to enable important engagement with other investigative divisions in national departments and the auditor-general’s office. Then also to ensure that the objective of ensuring the implementation of UN sanctions is ensured. Another objective is to assist with producing forensic evidence that could assist in identifying and combatting the flow of financial transactions and covering leaks between persons and property based on the flow of financial transactions.

There were no comments or questions.

Clause 20

Clause 20 amends section 4 of the FICA to adjust referencing from “national department” to “organ of state”, to refer to the investigative division of the auditor-general, and also to make other more technical types of amendments. Paragraph (c) of this amendment highlights that annual reports to the Minister may also include information that would substantiate the implementation of the FICA so that the Minister can be aware of measures and allows National Treasury to be aware of how effective the implementation is proceeding.

There were no comments or questions.

Clause 21

Clause 21 amends section 5 to enable the FIC to enter into public-private partnerships, to achieve its objectives, and to enable the FIC to request information from other organs of state and access databases held by other organs of state and access registers. This will facilitate the sharing of information.

The Chairperson asked whether entering into partnerships with private sector agencies for assistance compromises the individual and the FIC security?

Ms Bednar-Giyose replied no. All the information sharing would be subject to the Protection of Personal Information Act. There would certainly be stringent safeguards that would need to be provided.

The Chairperson asked whether the FIC is going to use private sector agencies to assist them?

Ms Bednar-Giyose replied that it may not necessarily be that they would be handling a lot of information but perhaps other administrative functions could potentially be facilitated through public private partnerships.

The Chairperson stated that he understands that their role has expanded and all of that. However, he knows that the SSA also gets private sector agencies to assist them but they meant to do it in such a way that neither their role or the agency’s inquiry on their behalf is compromised in the way it is done. He asked for a response on this.

Ms Naidoo replied that the partnerships envisaged here are, for example, the public-private partnerships between the accountable institutions and bringing law enforcement together so that there is a common sharing of information and within the strict confines of what can be shared. An example that would have been provided to the Committee would be the SAMLIT (South African Anti-Money Laundering Integrated Task Force) initiative that the FIC has started that has been recognised in terms of how the FIC can function more effectively with the information they have provided. The FIC can certainly provide more information in relation to the initiatives they have started in relation to the public-private partnerships that they have.

The Chairperson stated that he is not looking at it in that sense of detail. It just feels a bit strange that the FIC is going to do this.

Clause 22

Clause 22 amends section 21 B of the FICA. It includes additional referencing to ownership and control of other legal persons, partnerships, and trusts. This is trying to expand the scope of the types of ownerships that are contemplated under beneficial ownership. There are amendments throughout this section to include referencing partnerships, natural persons, trusts, and beneficial owners. This clause updates the current section to align with understanding and implementation of beneficial owner.

There were no comments or questions.

Clause 23

Clause 23 amends section 21C of the FICA. It amends the circumstances under which an accountable institution suspects that there is a suspicious transaction that may be undertaken and there is potential that if there is disclosure of the transaction then the accountable institution can consider making a suspicious report transaction and it might not continue to not perform customer due diligence requirements. It would tip off the client that there is a potentially suspicious transaction being detected.

There were no comments or questions.

Clause 24

Clause 24 amends section 21D of the FICA. This relates suspicious transaction reporting and the steps accountable institutions must take.

There were no comments or questions.

Clause 25

Clause 25 amends section 21F of the FICA so as to adjust referencing to refer to foreign politically exposed persons.

There were no comments or questions.

Clause 26

Clause 26 amends section 21G of the FICA to refer to domestic politically exposed persons and the other category that will now be referred to in the new schedule 3C of prominent influential persons.

The Committee stated that Ms Bednar-Giyose can skip a few clauses as the Committee is familiar with the clauses. This is an informal processing. Committee members can pick up on things as they read the Bill themselves. Members have enough time between now and Friday morning to identify problems.

Ms Bednar-Giyose stated that there are processes that are slightly amending the process when there are human sanctions taken by the United Nations. The amendments allow the sanctions to be implemented immediately instead of the Minister firstly announcing the adoption of the resolution in the government gazette. This appropriately aligns with process and how this will need to be implemented going forward.

Clause 29

Clause 29 also relates to the UN sanctions.

There were no comments or questions.

Clause 30

Clause 30 amends section 26C of the FICA.

There were no comments or questions.

Clauses 32, 33, and 34

Clauses 32, 33, and 34 relate to UN sanctions.

There were no comments or questions.

Clause 43

Clause 43 allows for administrative sanctions.

There were no comments or questions.

Clause 55

Clause 55 adds a new definition of “affected company” that would be inserted in the Bill. This was a definition that was included in the amendments in the National Assembly. This is part of amendments that in response to submissions in relation to listed companies and certain private companies that the reporting requirements relating to beneficial ownership that were proposed in the tabled bill, if they were applied in exactly the same manner to all categories of companies they could create some practical issues for listed companies and certain private companies. There were engagements that took place in light of the submissions in the Standing Committee on Finance. It was agreed that, in relation to this new category that will be referred to as an “affected company”, the manner in which they report beneficial ownership information would be slightly different compared to how other companies would be required to report the beneficial ownership information. Instead of just a simple process and requirements that would apply to all companies, there will be a slightly different process and requirements that will be applied to listed companies. This was discussed a bit in the Standing Committee process. It was endeavoured to come up with a workable approach that will still provide the necessary information.

There were no comments or questions.

Clause 56

Clause 56 amends section 33 of the Companies Act This requires reporting by many of the companies. This require them to the Companies and Intellectual Property Commission (CIPC) and submit their securities register and disclosures of beneficial interest. The CIPC would then need to include those in the register. There will be regulations included that will specify how some of the requirements relating to what information needs to be provided and how access to the information would be available and to whom.

Mr Ryder stated that employee arrangements within the entities change regularly. Where companies have these employee trusts, how often does the certification of compliance need to be formally submitted?

Ms Bednar-Giyose replied that the aspect of what information needs to be provided and how frequently it needs to be reported and updated would certainly be dealt with in the regulations. These are certainly important aspects in relation to the various registers and will be dealt with in the regulations. There may be different time frames that might be appropriate.

Clause 57

Clause 57 amends section 50 of the Companies Act. This amendment provides that companies other than those that are defined as an affected company. They would need to record the information relating to natural persons who are beneficial owners in their securities register. That would be included in the securities registers. There will be regulations that will provide further important details regarding the specific information.

There were no comments or questions.

Clause 58

Clause 58 amends section amends section 56 of the Companies Act. It sets out the reporting requirements for the affected companies. They will be required to have a register of persons who have beneficial interest equal to or more than 5% of the total number of securities in the company and also report the extent of those beneficial interests. They will also need to update the register on a basis that is in accordance with periods prescribed by regulations. It is provided that affected companies would then need to submit prescribed forms regarding the individuals that are the beneficial owners and periodically file notices as prescribed in the prescribed periods relating to when changes in beneficial ownership have occurred. There will be regulations set to set out the details regarding the period and the details of the information. The commission will have to maintain the register of this information that will be reported by the affected companies.

There were no comments or questions.

Clause 59

Clause 59 amends section 69 of the Companies Act. It updates the grounds of disqualification of persons for acting as directors of companies to include those individuals who are convicted of money laundering, terrorist financing, and proliferation financing activities. As well as those who are subject to UN sanctions. This is similar to what will be provided in the Trust Property Control Act and the Non-profit Organisations Act.

There were no comments or questions.

Clause 60

Clause 60 amends section 122 of the Companies Act. This relates to the fit category of affected companies. They receive a notice in terms of section 122 of the Companies Act. They will then need to file a record of that notice with the commission in the prescribed form and containing the prescribed information. Some regulations will be provided. A register will be maintained by the CIPC in relation to that information.

There were no comments or questions.

Clause 62

Clause 62 amends section 159 of the FSRA to provide that a significant owner of a financial institution as defined in that Act would need to comply with a directive that would be issued in terms of section 159 of the FSRA.

There were no comments or questions.

Clause 63

Clause 63 inserts the definition of beneficial owner in the FSRA s it will apply in relation to financial institutions. It will enable standards to be made by the financial sector regulators in relation to beneficial ownership. It will empower regulators to issue directives in regard to beneficial owners.

Adv Empie van Schoor, Chief Director: Legislation, National Treasury, that the very last section of the Bill allows for the president to bring the different provisions at different times. This will be aligned to when regulations are required.

The Chairperson reminded the Committee that they do not vote on the memorandum. The memorandum basically explains to the public and to the members of Parliament what is sought to be done. Many Acts are being amended. What does Ms Bednar-Giyose mean when she stated that her colleagues will continue from here?

Mr Vukile Davidson, Chief Director: Financial Sector Policy, National Treasury, clarified that Ms Bednar-Giyose’s statement was in regard to her colleagues answering questions from the Committee.

The Chairperson opened the platform for questions from the Committee.

Mr M Moletsane (EFF, Free State) stated that the Bill is a positive step to ensure that South Africa remains in compliance with its international objectives and avoids a possible blacklisting. The Bill will help the state tackle corruption, tax evasion, money laundering, terrorism financing only if it is well implemented.

The Chairperson stated that this is the wisest and kindest thing Mr Moletsane has said since the Committee met him in 2019.

Mr E Njadu (ANC, Western Cape) stated that he followed the discussions very carefully. There was a lot of clarity in the clause by clause discussion on how the Bill will assist government. The Committee is ready.

Mr Ryder thanked National Treasury for taking the Committee through the Bill and for being patient with the Committee. The Bill goes a long way to addressing some of the concerns that the Committee has. The amendments were appreciated and were sufficient to meet the Committee’s concerns. Implementation is going to be key. The Bill has been given a fair process.

The Chairperson informed civil society representatives that if they want to make representations they should do so by 17:00 the next day. He thanked the civil society representatives for joining the meeting. He does not foresee Friday’s meeting being a long meeting. He encouraged members to raise their concerns about the implementation of the Bill and about capacity. He encouraged the Committee members to make submissions and if anyone has submissions they must be sent before 17:00 the next day. The meeting was adjourned.


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