In a society as complex as South Africa, there are few easy wins in the fight against crime. Using the Regulation of Interception of Communications and Provision of Communication-related Information Act (RICA) to register SIM cards and ensure that all mobile communications in the country are traceable is one of them. It is the rare low-hanging fruit lawmakers should be racing to achieve ahead of the election.
Mobile phone operators are increasingly moving into FinTech, or financial services, allowing users to transfer money from their phones, apply for loans or buy insurance and funeral policies.
So as mobile services act more and more like banks, they may need to adhere to similar safety standards as banks. In fact, this may be essential as South Africa works to remove itself from anti-terror financing watchdog Financial Action Task Force’s (FATF) grey list and prove to the world it has controls in place to prevent money laundering and terrorism financing.
Even as mobile phones are used for banking, banks must adhere to stricter legislation such as the Financial Intelligence Centre Act (FICA), that expects them to know their customer, described by the well-known acronym KYC.
In South Africa there is a problem where some SIM cards are not properly registered. Each year a whopping 150-million SIM cards are distributed, more than two per adult in the country, many unpackaged with identifying numbers visible. They do not all get RICA-ed, that is linked to a specific individual with an identity document and address.
But even without a SIM card being RICA-ed, it appears users can at times send money across borders throughout Africa, while using SIM cards to register with money remittance services.
An investigation published in the Sunday Times late last year reported that between 2020 and March 2021 users sent through R6.3bn sent from 56,967 unregistered sim cards through a money transfer service to Sudan, Nigeria and Kenya. Some of these funds were believed to be linked to the Islamic State of Iraq and Syria (ISIS) terror financing.
The senders used cell phone numbers that had not been subject to a valid RICA process to register as clients at a money remittance service. Critically, RICA requires that cell numbers are verified by the telecommunication providers, but does not require by remittance services to ensure cards are RICA-ed. This loophole allowed money to be sent from unknown senders.
The FATF, which aims to prevent money laundering and illicit financial flows, notes in its documents, that when money is transferred from unknown senders the risks of money laundering or financing terrorism are increased.
The FATF wants countries to balance the need for financial controls to prevent untraceable cross-border transfers against the need to ensure the controls are not so stringent that they block the unbanked from access to financial services.
Notwithstanding, the need to expand access to mobile banking services, some African countries are clamping down on unregistered SIM cards. Nigeria and Namibia and Kenya have already done so.
In March 2024, Nigeria ordered telephone communication companies to block and disconnect users who have not linked a national identity number to a SIM card. Nigeria has been working for years to stop the use of unverified sim cards for years to reduce fraud, extortion, kidnappings and terrorism. Namibia required telecommunications operators to suspend all unregistered SIM cards by the end of March.
South Africa, as it aims to escape the grey list, could follow suit and begin to clamp on the ease of access to unregistered SIM cards. There is evidence that unregistered SIM cards can increase illicit financial flows making it hard to trace where cross border transfers have originated from.
It is time to ensure better enforcement of RICA provisions and stop the proliferation of unregistered SIM cards as part of the effort to intensify our fight against crime.
Siphelele Khanyile is the managing executive at Securi-Tech SA, the country’s largest producer of airtime vouchers.
