After an extended delay, President Zuma signed the Financial Intelligence Centre Amendment Bill (Fica) into effect over the weekend. It’s going to provide for more scrutiny and capability of reporting of persons and transactions regarding money laundering. It will also greatly improve ability of your Financial Intelligence Centre (FIC) to do its watchdog role.
The original bill, enacted in 2001 to combat money laundering additionally, the financing of terror, created a one-size-fits-all approach to managing the risks caused from different clients, and imbued a “tick-box” mentality to compliance. There wasn’t any incentive from finance companies to perform anything more than what was essential for law.
Money laundering was defined inside original act as “an activity which contains or is gonna have the effect of concealing or disguising the character, source, location, disposition or movement within the proceeds of unlawful activities”.
The amendments now signed into law by the president have broadened the scope to feature people regarding juristic entities like trusts and companies via the inclusion within the term “beneficial owner”, and that is thought as anyone in connection with a business that “owns” or individually or jointly “exercises effective control” above the legal person. The concept of complaintant has been enlarged, and after this includes anybody who conducts obviously any good single transaction with a lender.
Then there is an inclusion of an choice of public officials, executives of presidency agencies and state-owned entities along with private executives that have been included within the specification of “domestic prominent influential persons” which earmarks them for greater scrutiny (see table below).
The bill requires client-facing employees to obtain senior management approval to rent them in almost any method of trading. In addition, they have to use “reasonable measures” to establish the cause of wealth (profile) as well as the origin of funds (per transaction) from the client and conduct “enhanced” ongoing monitoring within the relationship. These changes were welcomed through the FIC, which said in their release: “Change[s] within the customer due diligence measures, will demand that institutions understand their relationships because of their customers instead of only identifying their clients, as is also required currently.”
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List of domestic prominent influential persons good bill: |
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National government |
President, deputy president, cabinet ministers and deputy ministers. The head and accounting officer/CFO of national and provincial gov departments, including State-owned entities and government departments. |
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Provincial government |
Premiers and men and women provincial executive councils |
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Local government |
Executive mayors of municipalities. Executive head and CFO or Chief Investment Officer of municipal entities |
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Other politicians |
All leaders of political parties registered with all the IEC |
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Traditional leaders |
Members of royal families and senior traditional leaders |
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Judicial |
All judges about the government payroll |
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Diplomatic |
Ambassadors and Commissioners |
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Military |
All officers while in the SA National Defense Force across the rank of Major-General |
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Private sector |
CEO, CFO, chairperson of board or chairperson of audit committee |
The definition of “non-compliance”, which refers to the finance institutions which might be responsible mainly for applying the controls the balance hinges on to keep track of and record suspicious transactions, is broadened. Not only is it a “failure to comply” using the provisions within the act, furthermore, it includes any failure a thing on any “order, determination or directive” manufactured in the act. Institutions are also expressly forbidden from undertaking any managing an anonymous client a treadmill working with a fictitious name.
There is the responsibility to vet clients and buyers as reported by the requirements from the act, but additionally from the context of your institution’s own risk and compliance framework. “This is important,” says Intellidex chairman, Stuart Theobald. “The key problem is so it introduces a risk-based strategy to combatting money laundering additionally, the financing of terrorism. It indicates banking institutions can establish their own personal risk and compliance framework and apply different variety of oversight based on the client there’re managing. So low-risk clients, who receive smaller amounts and then make regular payments, will almost certainly face a lighter compliance burden because banks should be able to use a lighter touch. The contrary shall be true for high-risk clients that could experience enhanced oversight.”
Listen to your interview with Banking Association of Africa Cas Coovadia and Moneyweb Editor Ryk van Niekerk:
https://www.moneyweb.co.za/wp-content/uploads/2014/09/170502-03.mp3
Theobald believes this development may also allow banks to innovate. “For a low-risk client, when using the capability of geo-location that smartphones provide is often a good choice to find out verification of residence than a product like an arbitrary rates bill.”
The aim of the FIC has been specifically recalibrated. In addition to identifying the proceeds of unlawful activities and combatting money laundering activities, it can now also expressly implement financial sanctions pursuant to directives from the UN Security Council. This can want the freezing of property and transactions. The centre has the chance to freeze transactions for a period of 10 days (it had become previously five).
The centre can also be necessary to be considerably more pro-active in their duties, because they are instructed to initiate analysis by information to use possession or received by other means. It isn’t clear what information by other means may represent – nonetheless it might easily include media reports or reports produced by government agencies like the Public Protector. “This means they a greater portion of a law enforcement agency than just a records office. They’re able to take advantage of the information they’ve already, where it once was very cumbersome for investigative agencies to access information, it must be easier now,” says Theobald.?
The FIC added: “The amendments could make significant improvements to the Financial Intelligence Centre Act, 2001 (FIC Act). They may strengthen the FIC’s opportunity to produce high-quality financial intelligence and also to share this which has a wider number of government departments and agencies within the search for combating financial crimes for example money laundering and terrorist financing while protecting the confidentiality of personal information.”
From the outlook during implementation, Moneyweb understands a great deal of the job is done. The South African Reserve Bank has oversight to keep track of and approve danger and compliance frameworks within the banks, so the industry will now be waiting around for the pin light in the form of minister Gigaba’s stated date for implementation.
The minister’s spokesperson could hardly be reached for comment in the time writing.
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