A South African official has called for tougher new laws to combat money laundering and terrorist financing. The new laws, which are currently being debated in parliament, aim to strengthen the existing Financial Intelligence Centre Act (FICA).

Under the current South African regulations there exist serious loopholes which essentially defeat the purpose of anti-money laundering and terrorist financing regulations — stopping the flow of illicit funds. While regulated firms must report potential violations to the authorities within a reasonable timeframe, the current FICA law permits firms to complete the transactions. Thus, if a violation is determined to exist, the underlying assets are likely no longer under the control of the firm that reported the violation and, therefore, nothing can be done to impede the flow of funds. These new laws are most welcomed — any steps to put more teeth into South Africa’s sanctions regimes would assist other regulators worldwide and potentially stop illicit funds before they reach their ultimate destinations.

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There was an interesting exchange recently on a discussion board that reveals some lingering questions surrounding what an IBAN really is. Is it something that one can safely share in order to facilitate a payment? Or is it something that one must guard with one’s life?

Despite the dramatic overhaul of payment processing in the euro zone where the IBAN’s role is essential, the IBAN is, ultimately, just an account number — after all, it’s an acronym for International Bank Account Number. The exchange exposes legitimate apprehension about sharing account information between two consumers. In business to business transactions, this type of information is readily shared — vendors print remittance information on their invoices which often includes the IBAN as well as the standard bank information. However, account number information sharing between two consumers is not as common so the question should be asked: “Would you feel comfortable giving your account number and bank name to a stranger?”

While the IBAN has been around for at least five years, there is still a fair amount of ground to make up in terms of demystifying it and clarifying its fraud potential. Furthermore, building awareness of and a comfort level with the IBAN will be an even larger task for countries outside the euro zone. The success of PayPal in the peer-to-peer space has been driven by its effective model of using omnibus accounts and keeping sensitive information about the two parties in the transaction separate. The Clearing House’s Universal Payment Identification Code (UPIC) is a similar approach targeted to the B2B space. In addition, Italy has recently mandated and is implementing an IBAN clearinghouse within its borders. This may prove itself to be a model for other SEPA countries — such an approach would go a long way toward assuaging the uneasiness associated with sharing these account numbers.