In South Africa, Anti-Money Laundering (AML) is covered by the Financial Intelligence Centre Act (FICA). According to international law firm Allen & Overy, “Amendments in May 2017 to South African anti-money laundering (AML) laws bring South Africa’s AML legislation in line with the global standards determined by the Financial Action Task Force (FATF).” The amendments include customer due diligence on beneficial owners of business entities and other enhanced customer due diligence procedures.
To enable more streamlined oversight over FICA, the South African government established the Financial Sector Conduct Authority (FSCA) as the market conduct regulator of financial institutions that provide financial products and services, including banks, insurers, retirement funds and administrators, and market infrastructures.
Benefits of Know Your Customer automation
South Africa has a sophisticated AML regime, so it’s no surprise that they allow digital Know Your Customer (KYC) identity verification. As stated by Marius Reitz, country manager for South Africa cryptocurrency exchange and wallet provider Luno, “Technology has become more sophisticated and allows companies to maintain the highest levels of KYC and AML/CFT compliance, whilst also making the customer experience considerably better.”
Digital KYC compliance provides many advantages to companies that operate in South Africa or plan to do so. Bypassing the need for physical locations accelerates expansion and lowers the cost of doing business. Customers enjoy the speed and convenience of signing up online or on mobile, improving the opportunities for customer acquisition. Compliance teams can focus on more complex due diligence factors, not on cumbersome data entry tasks. Systematized processes and audit trails provide a level of comfort to risk-averse operational executives.
Opportunities for the South African economy
It’s important to note that South Africa is the second largest economy in Africa. While it has recently experienced an economic slowdown, it averaged 2.71 percent growth from 1993 until 2019. It has a diversified economy with a growing and sizable middle class and an internet penetration rate of 53.7 percent, which is just slightly behind the world average. Unfortunately, there’s also a significant economic divide between the wealthy and low-income households; South Africa has one of the most unequal income distribution patterns in the world.
Following the example of Kenya, which has 83 percent internet penetration, and encouraging the widespread use of mobile technology and payments could help South Africa with its economic divide and other economic issues such as growth and competitiveness.
Automated KYC verification is one important step to increase financial inclusion. Improving the payments infrastructure and verification process will develop more trust, and provide a streamlined and seamless banking experience, helping grow the opportunities of the “rainbow nation.”