Selected challenges associated with the reliance on customer due diligence measures to curb money laundering in South African banks and related financial institutions
Authors: Howard Chitimira and Sharon Munedzi
Affiliations: LLB, LLM (UFH), LLD (NMMU). Research Professor and Professor of Securities and Financial Markets Law, Faculty of Law, North-West University; LLB, LLM (NWU), LLD candidate, Faculty of Law, North-West University.
Source: Journal of Comparative Law in Africa, Volume 8 Issue 1, p. 42 – 66
Customer due diligence is a means of ensuring that financial institutions know their customers well through know-your-customer (KYC) tools and related measures. Notably, customer due diligence measures include the identification and verification of customer identity, keeping records of transactions concluded between a customer and the financial institution, ongoing monitoring of customer account activities, reporting unusual and suspicious transactions, and risk assessment programmes. Accordingly, financial institutions should ensure that their customers are risk assessed before concluding any transactions with them. The regulation of money laundering is crucial to the economic growth of many countries, including South Africa. However, there are still numerous challenges affecting the banks and other role players’ reliance on customer due diligence measures to combat money laundering in South Africa. Therefore, a qualitative research methodology is employed in this article to unpack such challenges. The challenges include the failure to meet the identification and verification requirements by some South African citizens, onerous documentation requirements giving rise to other persons being denied access to the formal financial sector, and the lack of express provisions to regulate the informal financial sector in South Africa. Given this background, the article discusses the challenges associated with the regulation and implementation of customer due diligence measures to enhance the combating of money laundering in South African banks and related financial institutions. It is hoped that the recommendations provided in this article will be utilised by the relevant authorities to enhance customer due diligence and effectively combat money laundering activities in South African banks and related financial institutions.