Financial Intelligence Centre
The FIC was established in terms of Section 2 of the Financial Intelligence Centre Act (38 of 2001). The purpose of the FIC is to establish and maintain an effective policy and compliance framework and operational capacity to identify and combat crime, money laundering and terror financing in order for South Africa to protect the financial system, develop the economy and be a responsible global citizen.
The FIC collects, processes and analyses information disclosed or obtained in terms of the Act: to inform, advise and cooperate with investigating authorities, supervisory bodies, the South African Revenue Services and intelligence services to facilitate the administration and enforcement of the laws of South Africa; to exchange information with similar financial intelligence units in other countries regarding money laundering activities; to monitor and provide guidance to accountable institutions, supervisory bodies and other persons regarding the performance of their duties in relation to their respective compliance; and to retain the aforementioned information in the manner required.
The Counter Money Laundering Advisory Council
Renamed the Counter-Money Laundering Advisory Council in 2008, the organ was established to advise the Minister of Finance on best policies and practices for the identification of proceeds of unlawful activities and to combat money laundering. In addition, the Counter-Money Laundering Advisory Council will advise the FIC about the performance of its functions and act as a forum in which parties can consult one another.
Consisting of various government, accountable institutions and supervisory body representatives, the Counter-Money Laundering Advisory Council must be consulted before the Minister of Finance may create, change or repeal FICA regulations, amend the accountable institution list, supervisory bodies or reporting institutions or exempt anyone from FICA compliance.
Identification and Verification
For the money laundering control procedures to be effective, the FIC Act prescribes that accountable institutions must know who they do business with. As prerequisites for the establishment of business relationships or for the conclusion of transactions, the Act requires the identification and verification of each person or entity with which a transaction is concluded.
Identification and verification extends to new and existing clients according to prescribed procedures based on 4 categories namely natural persons, legal persons, partnerships and trusts. In Addition, in certain instances, members are exempt from compliance.
Accountable institutions are required to keep records of all character identification and verification documents and/or copies obtained before establishing a business relationship, as well as the nature of the business relationship or transaction and the parties to the transaction. Information on clients shall be updated if additional products are purchased by clients or amendments are made to existing products. Records may be kept physically or in electronic form and must be kept for a minimum of 5 years from the date on which the transaction is concluded or relationship is terminated. The accountable institution may appoint a third party to keep records on their behalf if free and easy access to the records is available. However, the accountable institution remains liable for failure of specified record storage.
Authorised Centre representatives, only by virtue of a warrant issued in chambers by a magistrate or regional magistrate or judge of an area of jurisdiction within which the records or any of them are kept, or within which the accountable institution conducts business, have access to records to examine, make extracts or copies of, any such records. These records or part thereof are admissible in court as evidence.
In terms of the FIC Act, all accountable institutions are obliged to report certain financial transactions of a specific threshold or frequency of occurrence. Several exceptions relating to long-term insurance such as life, disability or medical policies and investment in unit trusts or on the stock exchange such as pension funds, retirement annuities or provident funds are exempt from reporting.
In addition, accountable institutions are to report any suspicious or unusual transactions to the Centre. These include business receiving, transferring or laundering money or the proceeds from unlawful activities or property connected to financing of terrorist and related activities, has no apparent business or lawful purpose; is conducted for the purpose of avoiding the FIC Act requirement. Other reporting includes the evasion or attempted evasion of a responsibility to pay any tax, duty or levy imposed by the Commissioner for the South African Revenue Service.
Internal Rules and Training
Accountable institutions must formulate and implement internal rules to identify and verify identity, develop record management and storage systems, methods of identifying reportable transactions and other prescribe matters. In addition, accountable institutions must provide training to their employees and appoint a Compliance Officer to ensure compliance with the provisions of the FIC Act. Failure to comply is an offence that may result in penalties.
Offences and Penalties
Accountable institutions are guilty of an offence if they fail to identify persons and keep records; destroy or tamper with records; fail to give assistance to representatives of the Centre; fail to advise Centre representatives of client history when requested; fail to report cash transactions above prescribed limits; fail to report suspicious or unusual transactions; discloses information contained or to be contained in a report to the Centre; fail to report conveyance of cash in or out of the Republic; fail to send a report to the Centre; fail to report electronic transfers; fail to comply with a request by the Centre or investigating authority; fail to comply with a monitoring order; misuses, discloses, tampers with or destroys confidential information; fail to formulate and implement internal rules; fail to provide training or appoint a Compliance Officer; obstructs an official in the performance of their duties; conducts transactions to avoid reporting duties; or; wilfully accesses or modifies an application, data or computer system under the control of the Centre.
Certain offences carry imprisonment up to 15 years or fines up to R100 million.