As financial crimes become increasingly complex, greylisting has highlighted the significant challenges South Africa faces in combating money laundering and terrorist financing. Criminals are continuously evolving their methods, leveraging advanced technologies and intricate networks to obscure their identities and illicit activities. This underscores the need for a proactive, tech-savvy response from both businesses and regulatory bodies to safeguard the overall financial system.
The evolving tactics of financial criminals
ADVERTISEMENT
CONTINUE READING BELOW
Modern financial criminals employ a range of sophisticated strategies to launder money and finance terrorism. Techniques include deepfakes, document manipulation to disguise their identities, and complex layering strategies to obscure the origins of unlawful funds.
Read:
SA’s property laundromat exploited to clean dubious African funds
Standard Bank fined R13m for non-compliance/
A notable example is the case of Zimbabwean Zingai Dhliwayo, who impersonated South African Bethal Ngobeni by altering the photograph on his ID. Under his assumed identity, this accused gold trader embarked on a spending spree, acquiring six cars and two properties costing R4.2 million, while hoarding an additional R2.4 million in his bank account.
Within a mere seven months, Dhliwayo allegedly spent millions he ‘earned’ from purchasing stolen gold-bearing materials from mineworkers in Carletonville and reselling them at inflated prices on the black market — all of which could have been prevented through effective verification of his (fraudulent) ID.
Impacts of non-compliance in South Africa
South African regulatory authorities have demonstrated a renewed commitment to enforcing compliance with anti-money laundering (AML) and counter-terrorism financing (CFT) laws, particularly through the Financial Intelligence Centre Act (Fica), to extricate the country from the international grey list. This places significant pressure not only on the government but also on local institutions, where failure to comply with Fica regulations can result in hefty fines.
Read: Luno impersonation scammers siphon R700k from victim
In November 2024, a law firm faced a R7.7 million penalty due to non-compliance with Fica regulations. This case — among many others — starkly illustrates the stringent consequences that legal entities can face for neglecting their AML obligations.
Furthermore, in August 2024, the South African Reserve Bank sanctioned the State Bank of India, leading to a R10 million fine for shortcomings in customer due diligence and cash threshold reporting requirements. These incidents underscore the critical need for robust compliance programs to prevent financial misconduct.
Leveraging smart technology to combat financial crime
As criminals adopt more sophisticated methods, businesses must utilize advanced technologies to detect and disrupt illicit activities. Solutions like nCino KYC offer comprehensive tools designed to enhance compliance and protect against financial crimes.
nCino KYC enables third-party data verifications against credible databases and, crucially, secure digital liveness verification that ensures individuals are physically present during onboarding processes. This technological solution utilizes these data points to conduct automatic three-way comparisons of new clients’ images against those submitted alongside their documents and live selfies, as well as the photograph held by Home Affairs.
ADVERTISEMENT:
CONTINUE READING BELOW
This feature minimizes the risk of identity fraud by validating a person’s identity in real-time.
Additionally, the platform provides extensive screening capabilities, allowing businesses to perform thorough customer due diligence. By automating the verification of customer information against global watchlists and sanctions databases, companies can quickly and accurately identify potential risks.
The significance of biometric authentication and liveness testing
Biometric authentication, coupled with liveness testing, has become integral to enhancing security and compliance. These technologies confirm an individual’s identity based on unique biological characteristics while ensuring that the person is physically present during the verification process.
Liveness detection evaluates biometric features such as skin texture, pupil movement, and facial expressions, enabling the distinction between a live person and fraudulent representations like deepfakes, printed photos, or masks. This process greatly reduces the likelihood of identity fraud during digital onboarding.
Listen: What advancements have been made to get SA off the grey list?
Implementing biometric authentication and liveness testing provides several benefits:
- Enhanced security: By ensuring that only legitimate individuals have access to services, these technologies protect against unauthorized access and fraudulent activities.
- Regulatory compliance: Accurate identity verification assists businesses in adhering to AML and CFT regulations, lowering the risk of involvement in financial crimes and minimizing potential non-compliance penalties.
- Improved customer experience: Efficient and secure verification processes build customer trust and satisfaction, fostering stronger business relationships.
To lift its greylisting status, South Africa requires long-term solutions rather than quick fixes. It is imperative for South African businesses and regulatory bodies to adopt advanced technologies and robust compliance frameworks to secure the financial system as a whole. Solutions such as nCino KYC, which include biometric authentication and liveness testing, provide powerful tools for identifying and preventing financial crime. By embracing these innovations, organizations can enhance security, ensure compliance, and enhance the integrity of the financial sector.
Hawken McEwan, Director of Financial Crime Compliance, nCino KYC Africa.
Follow Moneyweb’s comprehensive finance and business news on WhatsApp here.
