Anti-money laundering bill tripped up by parliamentary due process

2 Nov 2022

The Standing Committee on Finance agreed that the push for Parliament to rush legislative amendments that were tabled only in late August to stave off greylisting by the Financial Action Task Force was ‘irregular’, ‘unacceptable’ and ‘unprecedented’.

Finance Minister Enoch Godongwana must explain to MPs why the Cabinet exempted the General Laws (Anti-Money Laundering and Combating of Terrorism Financing) Amendment Bill from including a socioeconomic impact study. Such short cuts compromise proper legislative process, warns the Standing Committee on Finance.

Whether Godongwana will deal with legislators’ concerns in person, in writing or by delegating, remains to be seen on Thursday evening, which is when the matter is pencilled in on the parliamentary diary.

It might be tight, as the committee’s letter to the minister had not been sent off before lunchtime on Wednesday.

But the bottom line is the Standing Committee on Finance agreed that the push for Parliament to rush legislative amendments that were tabled only in late August to stave off greylisting by the global monitoring entity, the Financial Action Task Force (FATF), was “irregular”, “unacceptable” and “unprecedented”.

South Africa seems to have put most of its greylisting avoidance eggs into one basket — enacting by the end of the year the General Laws Amendment Bill and the July 2022 Protection of Constitutional Democracy against Terrorist and Related Activities Amendment Bill.

This would allow South Africa to put its case to the FATF in January, before the final decision is made on greylisting in February 2023, according to the official government line.

But enactment by the end of 2022 means not only does the National Assembly have to pass both laws — which are nowhere near ready right now to go to the House — but so does the National Council of Provinces (NCOP), all by 2 December when Parliament is set to rise. The approved bills must go to President Cyril Ramaphosa for signing into law. Only then are they enacted.

Meeting this deadline seems increasingly unlikely.

Read more on Daily Maverick: Greylisting seems inevitable, but there are steps SA can take to mitigate the fallout

Pending ministerial explanations on the Cabinet legislative drafting exemption, Tuesday evening’s parliamentary finance committee meeting was postponed. It had meant to deal with an updated, revised General Laws Amendment Bill — which jettisons the mandatory registration of all nonprofit organisations (NPOs) in what’s a win for civil society — and the report on the bill. These steps are the last before a bill is put on the Order Paper for consideration, and possibly a vote, in the House.

‘This is an ambush’

“If there was an exemption [of the socioeconomic impact study], there must be reasons for the exemption. We will have to include the reasons in the report. After all, this bill has been with Cabinet for such a long time,” said the Standing Committee on Finance chairperson, Joe Maswanganyi.

“This is what you call an ambush,” he said, highlighting how long Cabinet had the bill while expecting the national legislature to hasten matters. “Because we have a FATF deadline, the Parliament of South Africa must not follow due processes.”

What was happening was “irregular” and the committee could not be rushed, said Freedom Front Plus MP Wouter Wessels, and DA MP Dion George agreed.

“This delay is not of our making. I do not believe this is regular. I have been around a long time, since 2008 … and this is not how it is done. We cannot do sloppy work,” said George.

Regardless of the FATF deadline, ANC MP Gijimani Skosana said, “We are not in a position to consider this report.” His colleague, ANC MP Noxolo Abraham, agreed.

“The way it has been done so far, it is not professional, it is not fair,” said Abraham.

National Treasury plea

The National Treasury contingent of two put in a heartfelt plea to proceed.

“We had received an exemption from Cabinet for this aspect [the socioeconomic impact study]. This was out of recognition of the massive time constraints. [The Cabinet], like you, have been accommodating,” the National Treasury’s chief director for financial sector policy, Vukile Davidson, told MPs, emphasising “how flexible and accommodating you have been and we apologise for the late submission”.

He, like Treasury colleague Jeannine Bednar-Giyose, the director for fiscal and intergovernmental legislation, talked of last-minute consultations that had stretched to Tuesday morning. Their offer to talk MPs through the revised bill was not taken up.

It also emerged on Wednesday that Parliament’s police committee had been delayed in its consultations on the Protection of Constitutional Democracy against Terrorist and Related Activities Amendment Bill. The outstanding responses from the Civilian Secretariat for Police on opposition MPs’ proposed changes would come only next week.

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DA MPs Andrew Whitfield and Ockert Terblanche raised issues of broad and vague definitions, including the use of “encouraging” in relation to terrorism activities, which the United Nations has determined as too broad.

Concerns about definitions and approaches were raised in the one-day public hearings in early September. One of the concerns was that academics and journalists could raise their professions as a defence when charged with possessing so-called terrorist content. But such an exclusion should apply from the start, said Whitfield.

It remains to be seen if, and how, these proposals will be included in this amendment legislation. Until that happens, the next steps towards enactment remain pending.

Ditto the General Laws (Anti-Money Laundering and Combating of Terrorism Financing) Amendment Bill, which changes 62 clauses across five acts.

The revised 31 October version of the bill amends the NPO Act to now only require the registration of non-government organisations which remit money, or do religious, charitable and cultural work outside South Africa.

It’s a significant win for civil society, even though the draft legislation now also allows the Department of Social Development’s NPO Directorate to delegate any administrative function to any organ of state. This means the directorate can allow, for example, the Financial Intelligence Centre, which tracks money, to become involved in monitoring nonprofits for possible money laundering.

Definitions tightened

Definitions of beneficial owners in the Companies Act have been tightened to persons who “directly or indirectly ultimately own a financial institution or exercise effective control”, to peel back the layers that can hide the real decision-makers.

But companies have been given a break on maintaining registers of such beneficial ownership details — only 5% or more of the total number of issued securities would be affected and would have to keep up-to-date records, and only “affected companies” would have to maintain relevant disclosures.

All this is yet to be discussed — alongside why and when the Cabinet exempted this draft amendment legislation from the socioeconomic impact study that’s a norm in lawmaking.

In the memorandum to the bill, the financial impact for the state is covered in only 25 words.

“Additional resources to carry out added responsibilities related to producing forensic evidence; additional resources to carry out inspections for estate agencies and gambling sector,” says the memorandum.

Godongwana would not comment and preempt the process, his office said in a text message on Wednesday.

The pressure on South Africa is significant as greylisting would impose additional due diligence steps and increase the costs of investing and doing business in the country.

Read more on Daily Maverick: South Africa's fifty shades of greylisting

South Africa faced an 85% likelihood of greylisting, according to research commissioned by Business Leadership SA from the consultancy Intellidex, which highlighted the need for clear communications and political will.

While the official focus seems to be on legislative changes, the FATF report shows that many, if not most, of the recommendations centre on South Africa’s risk status as a regional financial hub with significant cross-border cash movements and 3,000 vacant Hawks specialist posts.

As much remains unsettled, the pressure is on Parliament to fall in line. DM

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‘This is an ambush’

National Treasury plea

Definitions tightened