Amendments to the Financial Intelligence Centre Act (FICA)

FICA is the Financial Intelligence Centre Act, 2001 as amended by the FIC Amendment Act 1 of 2017 which amendments came into operation on 2 April 2018.

The ins and outs of subject to bond approval clauses

What is FICA and its amendments?

The South African government introduced the Financial Intelligence Centre Act In order to combat money laundering activities, the financing of terrorist and related activities (MLFT) as well as to impose certain duties on institutions and other persons who might be used for money laundering purposes and the financing of terrorist and related activities.

The Objectives of FICA

The purpose of FICA is to root out MLFT, which places in jeopardy the economy and constitutional order of any country. FICA seeks to fulfil this purpose by imposing certain obligations on Accountable Institutions, which are recognised as potential vehicles for financial malfeasance. These obligations regulate the way Accountable Institutions handle money and property in the course of their dealings with clients and prospective clients. Attorneys are one of 16 (sixteen) categories of Accountable Institutions falling within the ambit of FICA.

In terms of the FICA amendments, an Accountable Institution’s chief obligation under FICA is to design and implement a Risk Management and Compliance Programme (RMCP), which is a document setting out how the firm will (a) collect information about clients, (b) keep records of its clients’ transactions, and (c) report information to the relevant authorities in certain circumstances, (a) to (c) being crucial to FICA’s efficacy. The RMCP is the successor to what was known as the “internal rules” before FICA was amended by the Financial Intelligence Centre Amendment Act, No 1 of 2017, last mentioned making this a requirement in terms of section 42 thereof. 

Underpinning the RMCP is the “risk-based approach”, in terms of which an Accountable Institution is afforded the discretion to evaluate whether, and the extent to which each of its clients introduces MLFT risk to the Institution. The Client Due Diligence (CDD) procedures followed in respect of a given client must be tailored to and commensurate with that client’s MLFT risk as assessed by the Accountable Institution in terms of its own RMCP.

The RMCP and, indeed, FICA itself, exist within the wider context of South Africa’s status as a Financial Action Task Force (FATF) Member State; and the Institution’s own commitment to playing its part in protecting South Africa’s financial system and constitutional democracy by effectively identifying and managing the MLFT risks to which the Institution is exposed, and by cooperating with the relevant authorities whenever this is called for.

The duty to identify your client

FICA imposes a duty on Accountable Institutions. An Accountable Institution may not establish a business relationship or conclude a single transaction with a client unless the Accountable Institution has taken the prescribed steps which are:

  1. To establish and verify the identity of the client;
  2. If the client is acting on behalf of another person to establish and verify
    • the identity of that other person; and 
    • the client’s authority to establish the business relationship or to conclude the single transaction on behalf of that other person; and
  3. If another person is acting on behalf of the client, to establish and verify 
    • the identity of that other person; and 
    • that other person’s authority to act on behalf of the client.

Duty to keep a record

Whenever an accountable institution establishes a business relationship or concludes a transaction with a client (whether the transaction is a single transaction or concluded in the course of a business relationship which that Accountable Institution has with the client) the Accountable Institution must keep a record of any document or copy of a document obtained by the accountable institution in order to verify a person’s identity .

Duty to report 

The FIC Act requires a person who carries on a business, or is in charge of or manages a business, or who is employed by a business, and who has a suspicion of money laundering or terror financing activity or an unusual transaction, to report this to the Centre.

Each and every business must be involved in the fight against crime by filing suspicious and unusual transactions to the Centre. Your reports will assist the Centre in the fight against money laundering and the financing of terrorism. By reporting suspicious and unusual transactions, businesses will minimise the risk of the proceeds of crime in the country’s financial system. This can lead to a safer business operating environment. Crime and money laundering risk can be minimised when businesses take necessary measures to recognise suspicious and unusual transactions. The FIC will not investigate or prosecute any criminal activity; it will collect and analyse data submitted to it. Once it has done, so the data will be passed onto the relevant investigating authorities, intelligence services and the South African Revenue Service, which will carry out such investigations. Reporting of a client to the FIC may not be disclosed to the client being reported. Non-compliance with FICA carries severe penalties and all concerned parties are therefore urged to strictly comply with the Act at all times. 

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Amendments to the Financial Intelligence Centre Act (FICA)

FICA is the Financial Intelligence Centre Act, 2001 as amended by the FIC Amendment Act 1 of 2017 which amendments came into operation on 2 April 2018.

The ins and outs of subject to bond approval clauses

What is FICA and its amendments?

The South African government introduced the Financial Intelligence Centre Act In order to combat money laundering activities, the financing of terrorist and related activities (MLFT) as well as to impose certain duties on institutions and other persons who might be used for money laundering purposes and the financing of terrorist and related activities.

The Objectives of FICA

The purpose of FICA is to root out MLFT, which places in jeopardy the economy and constitutional order of any country. FICA seeks to fulfil this purpose by imposing certain obligations on Accountable Institutions, which are recognised as potential vehicles for financial malfeasance. These obligations regulate the way Accountable Institutions handle money and property in the course of their dealings with clients and prospective clients. Attorneys are one of 16 (sixteen) categories of Accountable Institutions falling within the ambit of FICA.

In terms of the FICA amendments, an Accountable Institution’s chief obligation under FICA is to design and implement a Risk Management and Compliance Programme (RMCP), which is a document setting out how the firm will (a) collect information about clients, (b) keep records of its clients’ transactions, and (c) report information to the relevant authorities in certain circumstances, (a) to (c) being crucial to FICA’s efficacy. The RMCP is the successor to what was known as the “internal rules” before FICA was amended by the Financial Intelligence Centre Amendment Act, No 1 of 2017, last mentioned making this a requirement in terms of section 42 thereof. 

Underpinning the RMCP is the “risk-based approach”, in terms of which an Accountable Institution is afforded the discretion to evaluate whether, and the extent to which each of its clients introduces MLFT risk to the Institution. The Client Due Diligence (CDD) procedures followed in respect of a given client must be tailored to and commensurate with that client’s MLFT risk as assessed by the Accountable Institution in terms of its own RMCP.

The RMCP and, indeed, FICA itself, exist within the wider context of South Africa’s status as a Financial Action Task Force (FATF) Member State; and the Institution’s own commitment to playing its part in protecting South Africa’s financial system and constitutional democracy by effectively identifying and managing the MLFT risks to which the Institution is exposed, and by cooperating with the relevant authorities whenever this is called for.

The duty to identify your client

FICA imposes a duty on Accountable Institutions. An Accountable Institution may not establish a business relationship or conclude a single transaction with a client unless the Accountable Institution has taken the prescribed steps which are:

  1. To establish and verify the identity of the client;
  2. If the client is acting on behalf of another person to establish and verify
    • the identity of that other person; and 
    • the client’s authority to establish the business relationship or to conclude the single transaction on behalf of that other person; and
  3. If another person is acting on behalf of the client, to establish and verify 
    • the identity of that other person; and 
    • that other person’s authority to act on behalf of the client.

Duty to keep a record

Whenever an accountable institution establishes a business relationship or concludes a transaction with a client (whether the transaction is a single transaction or concluded in the course of a business relationship which that Accountable Institution has with the client) the Accountable Institution must keep a record of any document or copy of a document obtained by the accountable institution in order to verify a person’s identity .

Duty to report 

The FIC Act requires a person who carries on a business, or is in charge of or manages a business, or who is employed by a business, and who has a suspicion of money laundering or terror financing activity or an unusual transaction, to report this to the Centre.

Each and every business must be involved in the fight against crime by filing suspicious and unusual transactions to the Centre. Your reports will assist the Centre in the fight against money laundering and the financing of terrorism. By reporting suspicious and unusual transactions, businesses will minimise the risk of the proceeds of crime in the country’s financial system. This can lead to a safer business operating environment. Crime and money laundering risk can be minimised when businesses take necessary measures to recognise suspicious and unusual transactions. The FIC will not investigate or prosecute any criminal activity; it will collect and analyse data submitted to it. Once it has done, so the data will be passed onto the relevant investigating authorities, intelligence services and the South African Revenue Service, which will carry out such investigations. Reporting of a client to the FIC may not be disclosed to the client being reported. Non-compliance with FICA carries severe penalties and all concerned parties are therefore urged to strictly comply with the Act at all times. 

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