Abstract
Mobile financial services, specifically mobile money, has the potential to expand access to financial services to millions of unbanked people in South Africa. As such, it looks very promising in terms of financial inclusion. However, concerns exist that mobile money can be detrimental to financial integrity since there are several proven risk factors linked to mobile financial services. These risk factors make mobile money very susceptible to money laundering. The potential for abuse and the need for appropriate controls is therefore something which cannot be ignored. While the South African legislator has made provision for comprehensive anti-money laundering preventative measures by means of the Financial Intelligence Centre Act 38 of 2001, there exists no South African legislation explicitly concerned with mobile money. It is therefore difficult to determine what the regulatory stance is in terms of mobile money in South Africa. The Financial Action Task Force (FATF) is, however, currently focusing attention on the effect which mobile money may have on financial integrity. The latest FATF Recommendations make provision for several anti-money laundering controls which are specifically applicable to mobile money, including controls regarding money or value transfer services and new technologies. While it is always difficult to balance financial integrity and financial inclusion, the risk-based approach makes it possible for governments to implement effective antimoney laundering measures, thereby preserving financial integrity, without the need to compromise on financial inclusion objectives. The fact that South Africa has not fully adopted a risk-based approach is a problem which needs to be addressed if mobile money is to deliver on its promises for financial inclusion, without being detrimental to financial integrity.
 
Highlights
From the above it is clear that South Africa has a reasonably extensive AML framework which, it is on par with international standards such as the FATF Recommendations, makes provision for the unique South African socio-economic setup – to a certain extent
It would seem that an over-cautious approach to customer due diligence (CDD) could be what is hampering the widespread development and acceptance of mobile money as a tool for financial inclusion
5.4 South Africa and the risk-based approach in terms of customer due diligence. In their endeavour to develop banking products aimed at enhancing financial inclusion, South African authorities were mindful of the fact that many individuals living in South Africa typically did not have residential addresses which could be verified by means of formal documentation, and that imposing full CDD – which, under national legislation,158 includes obtaining and verifying a residential address – would be impractical
Summary
According to FATF Recommendation 10, it should be illegal for financial institutions to keep anonymous accounts or accounts in obviously fictitious names. financial institutions should be obliged to implement customer due diligence (CDD) measures when establishing business relations2 – a principle which should. According to FATF Recommendation 10, it should be illegal for financial institutions to keep anonymous accounts or accounts in obviously fictitious names.. Financial institutions should be obliged to implement customer due diligence (CDD) measures when establishing business relations2 – a principle which should. The CDD measures which should be implemented include the identification of the client and the verification of the client's identity.. The CDD measures which should be implemented include the identification of the client and the verification of the client's identity.3 Guidance Note 3A reiterates this by stating that client identification and verification must be done "at the outset of the business relationship or single transaction.". Regulation 3(1) prescribes what such identification and verification of clients should entail:
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