South Africa’s removal from the Financial Action Task Force (“FATF”) grey list in October 2025 represented an important milestone in the country’s ongoing efforts to strengthen its anti money laundering and counter terrorism financing framework.
But the FATF was clear: while progress had been made, South Africa still needed to step up its ability to proactively identify and investigate money laundering. The Draft General Laws (Anti Money Laundering and Combating Terrorism Financing) Amendment Bill - now open for public comment - is a direct response to those expectations, and one that will have significant implications for the Financial Intelligence Centre (“FIC”), government agencies and individuals alike.
At the centre of the proposed reforms is an expansion of the FIC’s investigative powers, especially relating to lifestyle audits. This has generated considerable public interest and, in some cases, anxiety. As a forensic practitioner, it is important to unpack what the Bill actually proposes, why these changes are necessary, and what safeguards exist to prevent potential abuse of power.
Understanding the expanded FIC powers
A fundamental criticism raised by the FATF during South Africa’s grey listing review was that the country lacked adequate mechanisms to proactively identify suspicious activity. The FATF found that authorities tended to respond only once suspicious money flows were already detected, rather than identifying risks earlier in the process.
The General Laws Amendment Bill addresses this directly. It empowers the FIC to conduct lifestyle audits at the request of government entities - such as municipalities, departments, regulators or public sector bodies - in situations where concerns arise about an individual’s declared income versus their living standards. These audits would provide investigating authorities with relevant financial intelligence to help determine whether further inquiry is warranted.
At present, the FIC may only conduct a lifestyle audit if it is already following a suspicious financial trail. In other words, its current powers are reactive and limited to scenarios where a suspicious transaction report or red flag has already triggered an analysis. The proposed amendments remove this limitation. They would allow the FIC to assist with lifestyle audits even in the absence of a prior suspicion - for example, when a government entity wants to assess the integrity of applicants for sensitive positions.
This broadens the preventative toolkit available to government and is aimed at increasing transparency, accountability and early detection of unexplained wealth.
What a lifestyle audit actually is
A lifestyle audit is not a prosecution mechanism. It is an investigative tool that compares a person’s observed standard of living with their declared lawful income. The Bill formally defines it as determining whether an individual’s living standard is consistent with income from legitimate sources. The concept is familiar: examples of apparent wealth - luxury cars, international travel or high value property - that do not align with declared earnings can raise legitimate questions.
These audits serve as preliminary indicators, not conclusions. They do not constitute evidence in their own right. Nobody can be prosecuted, or disciplined, based solely on lifestyle audit findings. If further action is to be taken, the state must still gather admissible evidence to prove that the wealth or spending in question is not legitimately sourced.
Importantly, lifestyle audits are not new in South Africa. SARS has used them extensively for many years. The Bill simply extends this capability to a broader range of government bodies and equips the FIC with greater authority to support proactive governance and accountability measures.
Important safeguards to prevent abuse
With any expansion of state investigative powers, concerns naturally arise about potential misuse. These concerns are legitimate and have been anticipated in the drafting of the Bill. A number of critical safeguards remain in place.
1. Legitimate interest requirement
The FIC must be satisfied that the requesting entity has a lawful and legitimate basis for seeking a lifestyle audit. This includes demonstrating a prior relationship between the entity and the person under review. The FIC will apply judgment on a case by case basis; it is not obliged to conduct audits merely because they are requested.
2. Privacy and POPIA compliance
Privacy rights are preserved. The Protection of Personal Information Act (POPIA) continues to apply, meaning the FIC must ensure that information used or shared during the audit process is lawfully obtained, relevant, and handled with appropriate safeguards.
3. Notification responsibility lies with the requester
The FIC will not inform an individual that they are the subject of a lifestyle audit. Instead, the requesting entity must obtain the individual’s cooperation or consent before initiating the process. This requirement ensures transparency between the individual and the entity conducting the assessment.
These safeguards strike a balance between expanding the state’s ability to combat financial crime and protecting the rights of individuals.
The shifting landscape: cryptocurrency and alternative financial platforms
One recurring question is whether expanding the FIC’s powers will simply push criminal activity further underground or onto less regulated platforms, including cryptocurrency. This concern is real and increasingly visible in forensic investigations. Criminals often exploit crypto platforms to obscure money flows, move funds across borders rapidly, or create layers of complexity.
However, this is not unique to South Africa — it is a global challenge. The FATF has raised sustained concerns about the misuse of cryptocurrency, and in response, regulators worldwide have stepped up oversight and introduced enhanced reporting and compliance frameworks. Many traditional financial institutions have also started integrating cryptocurrency payment mechanisms into their systems because doing so allows for greater supervision and control of these transactions.
South Africa is not immune to these shifts, and authorities are adapting accordingly. Regulatory enforcement around crypto is tightening, and while criminals may attempt to exploit alternative platforms, law enforcement agencies are increasingly equipped to track and trace these movements.
Addressing broader vulnerabilities in the AML framework
The General Laws Amendment Bill is not limited to lifestyle audits. It contains a broader suite of reforms aimed at addressing vulnerabilities previously highlighted by the FATF.
1. Strengthening oversight of non profit organisations (NPOs)
NPOs have historically been exploited by criminal networks and terrorist organisations to move illicit funds due to limited disclosure and weak supervision. The Bill grants the NPO Directorate expanded monitoring and enforcement powers to ensure better transparency and compliance.
2. Enhancing beneficial ownership transparency
Another persistent FATF concern has been the ease with which individuals hide ownership of assets behind complex or opaque corporate structures. The Bill introduces measures requiring greater clarity around who ultimately owns and controls legal entities in South Africa. This makes it harder for criminals to conceal their interests and reduces opportunities for abuse.
Why this matters - and what comes next
South Africa faces another critical FATF evaluation cycle in 2026–2027. The reforms contained in the Bill are essential to demonstrating sustained progress and avoiding any slide back toward grey listing. The FATF expects not only legislative reform but also evidence of effective implementation. Strengthening the FIC’s powers, improving transparency and enhancing oversight mechanisms are key components of that commitment.
The broader message is clear: South Africa cannot afford complacency. A robust and proactive anti money laundering framework is essential to maintaining financial system stability, supporting legitimate business activity and upholding public trust.
For the vast majority of individuals who live within their means and declare their income honestly, these reforms present no cause for concern. But for those whose lifestyles are inconsistent with their legitimate earnings, the reforms send a clear signal: oversight is becoming stronger and the capacity for early detection is increasing.
These developments align South Africa with international standards and enhance our ability to identify, investigate and address financial crime. The General Laws Amendment Bill is a critical step toward a more transparent, accountable and resilient financial governance environment.
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Read the original publication at ENS
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