What Are Money Laundering Acts?
Prevention of Money Laundering Act, 2002 (PMLA) was enacted to fight against the criminal offense of legalizing income/profits from an illegal source. The Prevention of Money Laundering Act, 2002 enables the Government or the public authority to confiscate the property earned from the illegally gained proceeds.
Money laundering is the process of illegally concealing the origin of money, obtained from illicit activities such as drug trafficking, corruption, embezzlement, or gambling, by converting it into a legitimate source. It is a crime in many jurisdictions with varying definitions. It is usually a key operation of organized crime.
Money laundering in the Republic of South Africa is a hot spot for money laundering-related activities, including the narcotics trade, smuggling, human trafficking, and diamond dealings. South Africa’s position as the major financial center in the region, its relatively sophisticated banking and financial sector, and its large cash-based market, all make it a very attractive target for transnational and domestic crime syndicates. The South African Government (SAG) estimates that between $2 and $8 billion is laundered each year through South African financial institutions. The Proceeds of Crime Act (No. 76 of 1996) criminalizes money laundering for all serious crimes. This Act was supplemented by the Prevention of Organized Crime Act (no. 121 of 1998), which confirms the criminal character of money laundering, mandates the reporting of suspicious transactions, and provides a “safe harbor” for good faith compliance. Violation of this act carries a fine of up to rand 100 million or imprisonment for up to 30 years.
The Financial Intelligence Centre (FIC) was established in 2001 to act as the primary authority over Anti-Money Laundering (AML) efforts in South Africa. The FIC is responsible for establishing an AML regime and maintaining the integrity of the South African financial system by enforcing recordkeeping and reporting procedures of financial institutions within the country.
The FIC Amendment Act (No. 11 of 2008) was issued in August 2008 and took effect in 2010, and clarified the roles and responsibilities of supervisory bodies. The Money Laundering and Terrorist Financing Control regulations were published in 2002 and have since been amended on various occasions; they create a comprehensive legal framework for the combating of money laundering and terrorist financing.
How Many Money Laundering Acts Are There In South Africa?
The Financial Intelligence Centre Act, No 38 of 2001 (the FIC Act) together with the Prevention of Organised Crime Act, 1998 (POCA), the Prevention and Combatting of Corrupt Activities Act, 2004 (PRECCA), and the Protection of Constitutional Democracy Against Terrorist and Related Activities Act, 2004 (POCDATARA).
What Are The 3 States Of Money Laundering?
Placement
The placement stage of money laundering refers to how and where illegally obtained funds are placed into the financial system. Methods used by fraudsters include:
- Making payments to cash-based businesses
- Making payments for false invoices
- Putting small amounts of money (below the AML threshold) into bank accounts or credit cards
- Moving money into trusts and offshore companies that hide owner identities
- Using foreign bank accounts
- Aborting transactions shortly after funds are lodged with a lawyer or accountant
Layering
The layering stage of money laundering refers to the way that criminals separate illegally obtained funds from their source.
During this stage complex financial transactions take place and the origins and ownership of the funds in question are disguised. When carried out correctly, the layering process makes it incredibly difficult for AML investigators to trace the transactions back to the source of the funds.
Integration
The integration phase of money laundering happens when the laundered funds re-enter the economy in what appear to be legitimate business or personal transactions.
The money launderers will often do this by purchasing real estate or luxury assets in order to increase their wealth.