Report: South Africa’s Biggest Banks at Risk for Money Laundering

The South African banking regulator has warned that the country’s banking industry is at risk of becoming ensnared in money laundering and terrorist financing activity.

In a report issued Tuesday (July 26), the Prudential Authority of the South African Reserve Bank said the country’s five biggest banks, which control nearly 90% of assets, were most at risk.

“This is as a result of their high numbers of clients, substantial exposure to foreign country risk, use of non-face-to-face delivery channels which increases anonymity, very high exposure to cash, and the propensity for the illicit flow of funds,” the authority said.

One of the major banks reported it had 8,388 clients with unknown citizenship, “which poses a high risk within the sector,” the report said. Another bank said it had 1,782 clients with an unknown country of incorporation.

The report identified some common threats across the banking industry, including fraud, bribery, corruption, pyramid schemes, environmental crimes and tax offenses.

Vulnerabilities facing the sector include products that allow large volumes of cash deposits, and “the lack of a single client view across a bank when a client has more than one business relationship or accounts with different business units within the same bank,” the report said.

Earlier this week, PYMNTS reported that financial institutions in a number of countries have begun to set up information-sharing platforms to better spot fraud and money laundering.

See also: Banks Pilot Information-Sharing Projects to Reduce Fraud

Research in the U.K. has found at least 15 such projects worldwide, including Transactie Monitoring Nederland (TMNL), a collaboration launched in 2020 by the five largest Dutch banks that lets them pool encrypted transactional customer data.

Working with banks and their country’s financial intelligence unit, TMNL has made models that allow it to share data about unusual transaction patterns that could signal terror financing or money laundering. Privacy-enhancing technology allows TMNL to issue alerts from this data while keeping client information secret.

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