Abstract
LL.M. (Banking and Stock Exchange Law)
Money laundering and terrorist financing is a global issue. The advent of new technologies such as the internet and the impact of globalisation have forced businesses including banks to re-evaluate their business models. One of the key strategies currently being employed by South African banks is diversification of business interests through the establishment of subsidiary banks throughout the African continent. It is precisely this strategic shift which has exposed weaknesses in the management of money laundering risks as the South African banks are expected to ensure that the home country anti-money laundering standards are imposed on the subsidiary banks. The South African anti-money laundering regime is considered to be strong within the global context. However, the current Financial Intelligence Centre Act was not developed, and does not cater, for the position where home country anti-money laundering standards are to be imposed on subsidiaries. Even if the Act did cater for this position there would need to be intergovernmental agreements in place to give effect to the South African provisions on the subsidiary banks. Additional legislation such as the Banks Act provides for oversight and attempts to ensure that the standards are met to a degree. However, the Banks Act is applicable to the South African banks, and not to the subsidiaries due to sovereignty of state. It does to a degree require agreement between the various regulators of the countries involved.
The countries involved in these cross-border acquisitions are often at different phases of their social, political and economic development and may not have the same resources that South Africa has at its disposal. What occurs when there is a conflict between the legislation of the subsidiary and the home country or if it is simply impractical to impose the standards of the home country to the subsidiary? The risk to South African banks and the South African economy are great as apart from a fine from the South African regulator, there could be a perception that the South African banks’ anti-money laundering framework is not as strong as perceived. The South African banking sector is viewed as a first-world sector. A perception that the banking sector has been weakened through cross-border subsidiary bank acquisitions could lead to a loss of international investments, international business or could even be a determining factor in a ratings downgrade to the South African economy.
The dissertation was compiled reviewing all applicable legislation of South Africa as well as that countries where banks were acquired as subsidiaries, the letters of approval from the South African Reserve bank together with conditions and duties imposed on the approval, as...