How SA's business community is helping to combat financial crime
The Financial Intelligence Centre Act, 2001, sets out SA’s regulatory framework to combat money laundering and terrorist financing
A business community that fully understands financial crime, including money laundering and terrorist financing, is better equipped to respond to these threats and mitigate the risks of criminal abuse.
SA businesses and the country's financial system are safeguarded by the Financial Intelligence Centre (FIC) Act, 2001, which sets out SA’s regulatory framework to combat money laundering and terrorist financing. The act works in conjunction with the Prevention of Organised Crime Act, 1998, and the Protection of Constitutional Democracy against Terrorist and Related Activities Act, 2004.
The FIC Act identifies types of businesses that are vulnerable to abuse linked to money laundering, terrorist financing, and the financing of weapons of mass destruction. These “accountable and reporting institutions” have to fulfil various compliance obligations aimed at identifying, preventing and disrupting financial crime.
Compliance measures specified by the FIC Act that apply to accountable institutions include record keeping; appointing a compliance officer; training employees on FIC Act compliance; and registering with and submitting reports to the FIC.
Section 42 of the FIC Act places an obligation on accountable institutions to develop, document, maintain and implement a risk management and compliance programme. An accountable institution’s ability to apply a risk-based approach effectively depends on the quality of its risk management and compliance programme.
Reporting institutions have limited obligations in terms of the FIC Act, which include reporting to and registering with the FIC. There are only two reporting institutions — Krugerrand dealers and motor vehicle dealers, which fall under schedule 3 of the FIC Act.
In addition, section 29 reporting obligations apply to people who carry on, oversee, manage or are employed by a business. Those associated with a commercial undertaking as an owner, manager or employee must comply with section 29, regardless of whether or not they are accountable or reporting institutions.
Suspicious and unusual transaction reports
All businesses, accountable and reporting institutions must report suspicious and unusual activities and transactions that are potentially linked to money laundering and terrorist financing to the FIC. Suspicious and unusual transaction reports refer to transactions or activities that raise suspicions or give rise to a sense of discomfort, apprehension or mistrust. The person who files a report does not have to have proof of existence of a fact – it can be based on a mere suspicion.
A suspicious and unusual transaction or activity report must be submitted to the FIC as soon as possible but not later than 15 days after a person formed a suspicion concerning a transaction and/or activity.
Accountable and reporting institutions and other reporters must register on and file reports to the goAML electronic reporting platform on the FIC website.
Cash threshold reporting
Section 28 of the FIC Act requires that accountable and reporting institutions report cash transactions or a series of cash transactions above the prescribed limit of R24,999.99. A cash threshold report must be submitted to the FIC as soon as the accountable or reporting institution becomes aware of one or more such transactions, but not later than two days after the transaction has taken place.
Terrorist property reporting
When an accountable institution has in its possession or control property that is associated with terrorist and related activities, that accountable institution has a duty to report such information to the FIC.
Targeted financial sanctions
It's an offence for anyone to provide financing to a person that is sanctioned as per a resolution of the UN Security Council. Sanctioned people are listed because they are involved in terrorist financing, proliferation financing or other atrocities.
The FIC makes available the targeted financial sanctions list on its website and the consolidated sanctions lists can be found on the UN Security Council website. Accountable institutions have to scrutinise their client information against both these lists to determine whether their clients and related parties are listed.
Financial Action Task Force mutual evaluation
In 2019, a team of assessors from the International Monetary Fund, the Financial Action Task Force (FATF), and the Eastern and Southern Africa Anti-Money Laundering Group started assessing the implementation of SA’s efforts to oppose money laundering and the financing of terrorism, and the financing of weapons of mass destruction.
In October and November 2019, the government and the private sector outlined their approach to combating and mitigating these crimes.
The results of the mutual evaluation will be in a report that the FATF will adopt in June 2021 and publish soon after. These results will give SA a road map to guide continuous improvement of the country's legal and institutional framework for anti-money laundering and countering the financing of terrorism.
For more information on the application and obligations of the FIC Act, visit the FIC website, which provides guidance notes and public compliance communications.
This article was paid for by the Financial Intelligence Centre.