Abstract
The United Nations Charter discourages the use of armed force in the maintenance of international peace and security. The United Nations Security Council instead advocates for the use of sanctions, and targeted financial sanctions in particular, as a means of coercing designated persons (individuals and entities) into abstaining from proscribed behaviour. Unlike broad-based sanctions which may impact upon vulnerable groups of society, targeted financial sanctions target directly the intended criminals or offenders.
Targeted financial sanctions entail the freezing of assets and prohibitions to prevent funds or other assets from being made available, directly or indirectly, for the benefit of designated persons or entities. These measures have the effect of isolating designated persons and entities from the international trade system.
In South Africa, so-called “accountable institutions” such as banks must implement sanctions, and report to the Financial Intelligence Centre any interactions with designated persons. The Financial Action Task Force is an independent inter-governmental body that develops policies to protect the global financial system against money laundering, terrorist financing and the financing of proliferation of weapons of mass destruction. Its recommendations are regarded as the “gold” standard of financial crime prevention and detection. Recommendations 6 and 7 deal specifically with targeted financial sanctions.
South Africa is a member state of both the United Nations and the Financial Action Task Force and is therefore expected to abide by the pronouncements and recommendations of these leading organisations. In 2021, the Financial Action Task Force published a Mutual Evaluation Report of South Africa, assessing the country’s level of effectiveness in the combating of money laundering and terrorist financing. In the report, it made recommendations as to how the system should be strengthened. According to the report, South Africa’s targeted financial sanctions regulatory framework was lacking when measured against international standards, resulting South Africa being "grey-listed" in 2023 as per the Financial Action Task Force.
Consequently, South Africa introduced legislative enactments to strengthen its anti-money laundering framework and in particular its targeted financial sanctions regulatory framework. These enactments have addressed many of the key deficiencies identified in the Mutual Evaluation Report.
The purpose of this study is to analyse South Africa’s targeted financial sanctions regulatory framework and to compare it with the targeted financial sanctions regulatory framework of the European Union, United Kingdom and United States of America with a view to making recommendations for the development of the South African framework.