The Centre is an organ of state established in terms of Section 2 of the Financial Intelligence Centre Act 38 No.38 of 2001 (the FIC Act).
It is an institution that functions outside the public service but within the public administration.
The primary purpose of the Centre is to assist in the identification of the proceeds of unlawful activities and to combat money laundering activities as well as the financing of terrorism and related activities
Money Laundering is the process used by criminals to hide, conceal or disguise the nature, source, location, disposition or movement of the proceeds of
unlawful activities or any interest which anyone has in such proceeds. The act of conducting or causing to conduct two or more transactions with the
intention of avoiding the duty to report such transactions is a recognised offence in terms of section 64 of FIC Act.
Criminals who have generated an income from their criminal activities usually follow three common stages to launder their money. The first stage is
commonly referred to as ‘placement’. This is when criminals introduce their illegally derived proceeds into legitimate financial systems. An example of
this would be splitting a large portion of cash into smaller sums and thereafter depositing the smaller amounts into a bank account, or purchasing a series
of monetary instruments (cheques, money orders, etc.) with the smaller amounts.
The second stage is called ‘layering’. During this stage the launderer engages in a series of transactions, conversions or movements of the funds in order
to cloud the trail of the funds and separate them from their illegitimate source. The funds might be channelled through various means for example; the
purchase and sale of investment instruments, purchasing property and selling it soon after, or the launderer might simply wire the funds through a series
of accounts at various banks across the globe.
The third stage is ‘integration’. This generally ensues the successful stages of placement and layering. The launderer at this stage causes the funds to
re-enter the economy and appear to be legitimate. The launderer might choose to invest the funds into real estate, luxury assets, or business ventures.
Although use of all three stages is common, it is not always utilised by the criminal who wishes to launder funds. In some instances criminals may choose
to merely ‘place’ the illegally derived funds into the economy by merely depositing the money into his or her bank account, without any layering occurring.
They can withdraw the money and spend it at their will.
Financing of terrorism is the collection or provision of funds for the purpose of enhancing the ability of an entity or anyone who is involved in terrorism
or related activities to commit an act that is regarded as a terrorist act. Funds may be raised from legitimate sources, such as personal donations and
profits from businesses and charitable organizations, as well as from criminal sources, such as the drug trade, the smuggling of weapons and other goods,
fraud, kidnapping and extortion.
The FATF is an inter-governmental policy making body, comprised of over 30 countries, that has a ministerial mandate to establish international standards
for combating money laundering and terrorist financing. Several jurisdictions have joined the FATF or a FATF-style regional body, and have committed at the
ministerial level to implementing the FATF standards and having their anti money laundering and combating of terror financing (AML/CFT) systems assessed.
Within Africa the Eastern and Southern African Anti-Money Laundering Group (ESAAMLG) was established to serve as a FATF-style regional body for Eastern and
Southern African countries.
These are internationally endorsed global standards for implementing effective AML/CFT measures. They increase the transparency of the financial system
(making it easier to detect criminal activity) and enable countries to successfully take action against money launderers and terrorist financiers.
Corrupt and opaque financial systems are inherently unstable. Excessive money laundering can cause increased volatility of international capital
flows and exchange rates, market disparities, and distortions of investment and trade flows.
Financial institutions that are exploited in this manner are exposed to reputational risk, financial instability, diminished public confidence,
threats to safety and soundness, and direct losses.
Terrorists need money to finance attacks. Tracing this money is one of the few preventive tools that a government has against terrorism.
The international community—through numerous international treaties, United Nations Security Council Resolutions and best practices—has endorsed
the FATF Recommendations at the highest political level.
Countries with weak AML/CFT systems are attractive to criminals because they provide an environment in which criminals can enjoy the proceeds of
their crimes and finance their illicit activities with little fear of facing punishment.
Criminalise money laundering and terrorist financing. Correctly train law enforcement and prosecutorial authorities, and equip them with sufficient
powers and resources.
Implement effective mechanisms to freeze, seize and confiscate criminal assets.
Ensure that the required range of persons and entities in both the financial and non-financial sectors implement the AML/CFT preventative measures
Prevent criminals from operating anonymously or under false identities by accurately identifying customers and knowing enough about their business to
be able to differentiate between legitimate business and criminal activities.