New FICA Requirements for Accountable Institutions:
On 2 May 2017, the Financial Intelligence Centre Amendment Act (The Amendment Act) was signed by President Jacob Zuma.

The Financial Intelligence Centre Amendment Act amends the Financial Intelligence Centre Act, 2001 which aims to fight financial crimes, such as money laundering, tax evasion and terrorist financing activities.
The Act hopes to further ensure transparency and integrity within the country’s financial system.
The implication the Act has on South African businesses is considerable and should not be taken lightly. Not only are the various requirements of the Act stringent, if convicted of an offense, the penalties can be severe.
It is critical that businesses affected by the Act understand and fulfil their responsibilities in terms of the Act

Who Does The Act Affect?
FICA identifies what it refers to as “accountable institutions” which include banks, estate agents, attorneys and businesses providing money remittance services, long-term insurance services and foreign exchange, among others.
In addition to the accountable institutions, the Act affects all clients and consumers who enter into either a single transaction or a business relationship with them.
If your business falls within any of these categories FICA will have a major effect on how you do business.
Here are the ways that businesses will be affected by the 2017 FICA Amendment Bill:

  •  Business owners, as well as others who own or control the business (beneficial owners) will be expected to be identified to prevent the misuse of legal entities to commit crimes such as tax evasion;
  •  The customer due diligence process will have to be improved to ensure that business owners fully understand the nature and potential risks posed by their customers;
  •  Business owners will be required to identify, assess and understand the money laundering and terror finance risks their businesses faces in terms of the products and services they offer their clients;
  •  Businesses will have to make provision for the freezing of assets relating to customers or clients associated with terrorism in line with United Nations Security Council Resolutions;
  •  Every business is expected to be responsible with regards to the collecting, processing, storing and sharing of another entity’s personal information in line with the Protection of Personal Information Act (POPI Act);
  •  The Amendment bill provides for inspection powers for regulatory compliance purposes in accordance with the Constitution; and
  •  The Bill enhances certain administrative and enforcement mechanisms.

The Amendment requires that accountable institutions which determine that a prospective client is a domestic prominent influential person or a foreign prominent public official:

  • Obtain senior management approval for establishing the business relationship.
  • Take reasonable measures to establish the source of wealth and source of funds of the client, and
  • Conduct enhanced on-going monitoring of the business relationship.
    A domestic prominent influential person is defined as an individual who holds, including, in an acting position for a period exceeding 6 months, or has held at any time in the preceding 12 months in the republic, a prominent public function including that of:
  • The president or deputy president;
  • A government minister or deputy minister;
  • The premier of a province;
  • An executive mayor of a municipality;
  • A leader of a political party;
  • A member of a royal family or senior traditional leader;
  • A member of an executive council of a province;
  • The head accounting officer or chief financial officer of a national or provincial department or government component;
  • The municipal manager of a municipality;
  • The chairperson of a controlling body, the chief executive officer, chief financial officer or chief investment officer of a public entity; or
  • The chairperson of a controlling body, chief executive officer, chief financial officer or chief investment officer of a municipal entity.

The amendment act introduces the requirement to identify the beneficial owners of legal entities, partnerships and trusts by, inter alia, determining the identity of each natural person who, independently or together with others, has a controlling ownership interest in that legal person. Accountable institutions are obliged to conduct ‘client due diligence’ (‘CDD’) to establish and verify the identities of their clients. Essentially you are required to know who your client is with whom you are doing business. The Amendment Act now imposes enhanced measures relating to ongoing CDD and the monitoring of business relationships, as well as obligations in respect of prominent and influential persons. The Amendment Act also introduces additional due diligence measures relating to legal persons, trusts and partnerships. Client due diligence processes will therefore need to be reviewed by every accountable institution.

Section 42(1) of the Amendment Act now imposes an obligation on Accountable institutions to develop, document, implement and maintain a Risk Management and Compliance Programme, which sets out the FICA compliance obligations of the business and its procedures for ensuring that these obligations are met. This must be approved by the board of directors, senior management or other person or group exercising the highest level of authority in an accountable institution. A failure to implement such a programme may lead to administrative sanctions.

If one looks at the amendments introduced by the Amendment Act, all accountable institutions will need to review their current FICA frameworks to address the changes identified above. Although the Amendment Act has been signed, it has not yet come into operation, which does provide your organisation opportunity to timeously address your FICA compliance in line with the new amendments

 This article is correct as at the time of going to press, however it is no substitute for a consultation with an attorney.
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