Financial Intelligence Centre Act, South Africa (FICA)
As part of government measures to enforce financial regulations similar to other nations, South Africa brought into effect an Act to curb money laundering, tax evasion, and terrorist financing activities. The Financial Intelligence Centre Act, 38 of 2001 (FICA) came into effect on 1 July 2003, with the purpose of fighting financial crime and overseeing economic and trade sanctions.
The FIC Act lays down the basic framework of compliance to establish a strong financial system for speedy economic growth and social development. The objective of the FIC Act is very clearly established – to regulate South Africa’s anti-money laundering and counter- terrorism financing programmes. At the core of the Act is domestic compliance with the international FATF 40 Recommendations. This includes a minimum standard of compliance procedures to be followed internally by the regulated entities.
The FIC acts as the supervisory and regulatory body for AML/CTF compliance. It complements POCA, the Prevention of Organised Crime Act 121 of 1998, which lists the money laundering offences that businesses and financial systems must control. The FIC acts together with the Protection of Constitutional Democracy Against Terrorist and Related Activities Act 33 of 2004 (POCDATARA) and the Prevention and Combating of Corrupt Activities Act 12 of 2004 (PRECCA), for a comprehensive framework to control money laundering in South Africa.
Under the Act, FIC promotes compliance by providing guidelines for training and monitoring regulatory processes. Further, it provides an interpretation of matters related to the Act through the Public Compliance Communications (PCCs) and Guidance Notes, published under section 4(c).
Who is Regulated under the FIC Act?
In addition to banks, financial institutions, estate agents, brokers, attorneys, and insurance companies; FIC lists the following as accountable institutions under the amended Act:
– Professional accountants,
– Persons who provide trust and/or company services,
– Dealers in high value goods (including, precious metals and stones, motor vehicles and coins),
– Co-operatives, which provide financial services, as defined in the Co-operatives Banks Act, 2007 (Act 40 of 2007),
– Short-term insurers as defined in the Short-Term Insurance Act, 1998 (Act 53 of 1998),
– Credit providers registered under section 40 of the National Credit Act, 2005 (Act 34 of 2005),
– Money or value transfer providers,
– Providers of private security boxes or security vaults for the safekeeping of valuables,
– Auctioneers, including sheriffs, as performing the job of an auctioneer at a public auction,
– Dealers in copper,
– Virtual currency exchanges.
Requirements of regulatory compliance
Regulated entities must:
– Adopt a Risk Based Approach and conduct Customer Due Diligence (CDD).
– Abide by record keeping guidelines,
– Maintain a Risk Management and Compliance Programme (RMCP),
– Conduct sanctions screening as mentioned in amended section 28A.
Sanctions under the FIC Act
The FICA uses its power under the law to impose administrative sanctions if an accountable or reporting institution, or any person with an obligation to comply; has failed to conform with the Act or a directive issued under the Act. The list of sanctions is available on the website.
Additional due diligence requirements of certain customers are specified, along the lines of sanctions screening provided under the regulations of other countries. Judicial individuals, foreign nationals holding prominent office or domestic public officials, are to be screened with due diligence. The guideline, like the provision of Politically Exposed Person (PEP), makes it mandatory for the regulated entity to establish the source of wealth and conduct ongoing customer due diligence (OCDD) of such public figures. The same scrutiny is to be applied to their family members or close associates.
