From the FIC Desk.

FSPs and compliance officers take note:

The Financial Intelligence Centre (FIC) Act has been amended to improve the protection of the integrity of South Africa’s financial system and strengthen its ability to prevent and sanction money laundering and financing of terrorism.

The FIC Amendment Act was signed into law by the President on 26 April 2017, but the determination of the commencement date was left to the Minister of Finance. The Minister of Finance has signed and gazetted the coming into operation of the various provisions of the FIC Amendment Act.

Different commencement dates were determined as follows:

  • The first set of provisions came into effect on 13 June 2017. These provisions do not have any effect on accountable institutions and relate to:
    • Repeal of the provisions on Counter Money Laundering Advisory Council (CMLAC).
    • Sharing of information.
    • Arrangements for consultation with industry.
  • The next set of provisions will come into operation on 02 October 2017 and relate to:
    • Adoption of a risk-based approach to ensure that institutions understand money laundering and terrorist financing risks they face in their businesses and put appropriate measures in place to prevent or mitigate such risks.
    • Establish appropriate policies, procedures, systems and controls that are effective for mitigation of money laundering and terrorist financing risk.
    • Develop, document, maintain and implement a Risk Management and Compliance Programme.
    • Apply appropriate customer due diligence measures to manage money laundering and terrorist financing risks.
    • Establish and verify identity of beneficial owners of legal persons, trusts and partnerships.
    • Manage relationship with Prominent Persons (i.e. Domestic Prominent Influential Persons and Foreign Prominent Public Officials).
    • Keep records of single transactions and business relationships.
    • Assign senior person in the business to take responsibility for governance of AML/CTF compliance.
    • Provision of ongoing training to employees on the provisions of the FIC Act and Risk Management and Compliance Programme.
  • The dates for the last set of provisions relating to targeted financial sanctions and the freezing of assets in accordance with the United Nations Security Council Resolutions will be determined after 02 October 2017.

It must be noted that most sections of the FIC Amendment Act that come into effect on 02 October 2017 require that the current Regulations be amended and that the current Exemptions be withdrawn before or at the same time these amendments come into operation. Guidance must also be in place to assist accountable institutions in complying with the new requirements.

In light of the above, the FIC has published the following documents on its website for noting:

  • Notice on commencement dates of the FIC Amendment Act;
  • Gazette containing the FIC Amendment Act as signed by the President; and
  • Roadmap for institutions and supervisors, detailing action plans and timeframes for implementation of the FIC Amendment Act.

The FIC also published the following set of documents for public comment:

  • Draft Guidance on the implementation of new measures introduced by the FIC Amendment Act;
  • National Treasury’s high-level document titled “A new approach to combat money laundering and terrorist financing” which provides a long-term vision, strategy and overview on implementation of the FIC Amendment Act;
  • Draft Government Notice, with an explanatory note, announcing the withdrawal of existing Exemptions; and
  • Draft Government Notice, with an explanatory note, announcing amendments to existing Regulations.

It would appear that stakeholders are largely unaware of the above mentioned documents which were published on the FIC’s website and the consultation process in respect of such documents.

We recommend that FSPs and compliance officers should familiarise themselves with these documents and ensure that they are ready when the different implementation dates of the FIC Amendment Act become effective.

The FIC’s website can be accessed on: www.fic.gov.za

Implementation of the FIC Amendment Act

Below are a number of regulatory expectations that the Registrar’s office deemed it necessary to clarify regarding implementation of the FIC Amendment Act.

Consultation with stakeholders

Accountable institutions supervised by the Registrar’s office may not be fully compliant with the bulk of the provisions of the FIC Amendment Act which take effect on 02 October 2017. The Registrar’s office also notes that the ability and capacity to comply with the provisions of the FIC Amendment Act may not be the same for both large and smaller accountable institutions. To this end, the FSB, together with National Treasury and the FIC, has started a consultation process to bring the FIC Amendment Act into operation.

Two consultation workshops have already been held with industry bodies and certain stakeholders on 12 June 2017 and 18 August 2017 respectively. Further consultations will be held.

Readiness assessment

As part of the consultation process, the FSB will also circulate a survey during the month of September to assess the state of readiness by the industry to implement the new provisions of the FIC Amendment Act. We would like to ask for your support and participation in the survey.

Transitional period

Depending on the outcome of the survey, the Registrar’s office may consider a transitional period for all accountable institutions regulated by it or for different categories of institutions thereby allowing businesses additional time to implement the new requirements. The Registrar’s will then engage the industry in setting out clear expectations and milestones.

Gap in compliance

Accountable institutions should start now and continue throughout the transition period to develop policies, procedures, systems and controls to implement the new requirements of the FIC Amendment Act. We wish to remind the industry that at no point during or after the transition period should accountable institutions not know who they are doing business with and must ensure that proper records of transactional activities with clients are kept at all times.

Accountable institutions will be expected to demonstrate progress towards full compliance with the new requirements at agreed milestones and timelines. We would like to draw your attention to the draft guidance issued by the FIC on the implementation of new measures introduced by the FIC Amendment Act. This draft document on which the FIC seeks input, is still in a draft stage, but it provides the type of information that any institution needs to comply. The document seeks to establish consistent and effective best practices towards implementation of a risk based approach and other elements of the new FIC legislation.

Inspections

The Registrar’s office will continue to conduct FIC inspections during the transition period to monitor compliance, provide guidance and advise accountable institutions on implementation of the new requirements.

Sanctions

Sanctioning non-compliance with the new requirements of the FIC Amendment Act will be delayed in order to allow sufficient time to accountable institutions to make the necessary adjustments to implement the new requirements.

However, administrative sanctions will be imposed on non-compliance with the current provisions of the FIC Act that are not amended, such as registration and reporting obligations.

See our FICA Workshop: https://integrityacademy.co.za/index.php/qual-cour/compliance-exams#Comp1

Fit-and-Proper Qualification: https://integrityacademy.co.za/index.php/qual-cour/nc-nqf5