South African Treasury Proposes Greater Bank Vigilance Over “Prominent Influential Persons”
04 Feb 2016

In a bill presented before South Africa’s Parliament this week, it has been proposed that banks and other financial bodies should exercise greater scrutiny of “prominent influential persons”.

The term “prominent influential persons” is a broader term than the standard international expression “politically exposed persons”.

In an interview this week, the Treasury’s chief director for financial investments and savings, Olano Makhubela, stated that the broader definition reflects the fact that individuals in the private sector also hold significant influence and require greater scrutiny.

Banking Association SA Managing Director, Cas Coovadia, stated banks were willing to increase scrutiny of such individuals to ensure they avoid complicity in illegal activities. He also argued, however, that implementing the new policy would be challenging without a data source to identify the individuals concerned.

Coovadia stated, “The inclusion of close associates and family members presents additional challenges because this, potentially, has very wide scope”.

The bill will also require accounting institutions to identify and verify the ultimate beneficial owner of legal entities, trusts and partnerships.

This initiative begs the question whether PEPs are being adequately defined and identified in South Africa, because any person in the Private Sector who is a prominent influential person and has political clout should be defined as a PEP. Sensitivity around PEPs relates to concerns about bribery and corruption risk which is particularly significant in a South African context. If people in the private sector have no significant political influence, then what form of influence is the government concerned about, and if it does not relate to bribery and corruption risk what predicate crime is the initiative designed to manage? The initiative has the potential to cause confusion, and unless the private sector understands the drivers behind it and has the data sources from which to identify such people, practical compliance could prove problematic.


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