The new amendments of FICA changes the compliance framework for accountable institutions to a great extent and we'll discuss some of the more pertinent items in this blog post.

According to the new requirements of FICA, accountable institutions now need to take a risk based approach to FICA and the implementation thereof. This includes:
 

• The nature, scale and complexity of the accountable institution’s business; 
• The diversity of its operations, including geographical diversity; 
• Its client, product or services profile; 
• Its distribution channels; 
• The volume and size of its transactions; and 
• The degree of risk associated with each area of its operation. 

 
One must also now be able to risk rate clients according to the risk that they pose with regards to being used for money laundering or to channel the proceeds of any crime. Certain customers and businesses are a lower risk than others and some are a higher risk. Some of the aspects that one can look at to determine the risk a client poses are:
 

• Does the client operate in a sector or industry that is subject to specific standards, market entry or market conduct requirements, other regulatory requirements (especially AML/CFT measures)? 
• Has the client been in a business relationship with the institution for a period of time? 
• What has been the patterns of transaction behaviour (e.g. speed, frequency, size, volume, etc.) of a client who has a history of a business relationship with an institution? 
• Has the institution previously observed suspicious or unusual activities or transactions on the part of the client? 
• If the client is a corporate vehicle, is it part of a complex or multi layered structure of ownership or control? 
• What information does the client provide concerning their source(s) of income? 
• What is the nature of the client’s business activity, e.g. does the activity involve transacting in large amounts of cash, cross-border movements of funds, trading in sensitive, controlled or sanctioned commodities, etc? 
• What is the nature of the type of the products and services offered by the client? 
• Does the client operate solely within the country or do they have cross-border operations? 
• Is the client’s product selection rational with a view to support their business or personal needs? 
• Does the client occupy a prominent public position or perform a public function at a senior level or does it have such individuals within its ownership and control structure? 
• Is there adverse information about the client available from public or commercial sources? 
• Is the client known to be subject to financial sanctions? 

 

When and if you see that a customer is a medium to higher risk we always advise in taking extra measures with software such as:
PEP (Politically Exposed Person) checks 
Sanctions checks
Adverse news checks (i.e. that shows allegations or actual proven criminal activity)
Understanding the sources of funds better and the transaction aims
Asking any other questions that would comply with your risk based approach and set you mind at ease or that would prover your concerns with the client

We can assist you with any policy drafting requirements, risk measurements, training and software checks for PEPs, Sanctions and Adverse news screening. Contact us today for assistance to ensure your business is safe!

Schedule 1 and 3 to the Financial Intelligence Centre Act lists who should register with the FIC as Accountable and Reporting Institutions respectively. A failure to register with the FIC carries maximum penalties of up to R10m (R50m for entities) and 5 years in prison. Yikes!

It is also quite important to note that each branch of a business must register with the FIC separately, not just the head office.

The difference between Accountable and Reporting institutions are that Reporting Institutions merely report certain transactions on a continual basis, whereas Accountable institutions need to have policies and procedures to identify clients, to risk rate them according to a risk management control program and ultimately report certain transactions to the FIC such as Cash Threshold Reports (CTR's) and Suspicious Transaction Reports (STR's), among other things.

At the time this is published the list of Accountable and Reporting institutions are as follows:

Now it is also interesting to note that these lists are under review by the FIC and they will likely be expanded to include other service and product companies such as credit providers and auctioneers.

If you or your company needs any advice or services that with regards to FICA and Anti-Money Laundering please give us a call!

Accountable institutions such as lawyers, financial services providers and estate agents (among others) are required by the Financial Intelligence Centre Act 38 of 2001 (FICA) to provide training to staff on FICA in terms of section 43. The training must enable staff to comply with FICA and the internal rules of the company itself and it is not a requirement that this particular training puts them to sleep (although some compliance training providers can readily be regarded as sleep training experts).

A recent "Public Compliance Communication No. 18" by the FIC stated that the training must educate the employees on a range of different factors. Different training levels can be implemented at different levels of the organisation. We believe one can have a General Awareness for all staff in the company and then a more in-depth Specific Awareness training course. However, as always, it depends on the organisation to conduct training commensurate to the risks it is facing.

"The training can take place in any manner that the company deems fit. I.e. online or in person."

The training can take place in any manner that the company deems fit. I.e. online or in person. Tests must also be done to assess the knowledge gained and record must be kept of the training given and attendance. The FIC stated that the training must be "ongoing" and "refresher" training must be conducted. We believe that a good rule of thumb is to do any AML/FICA/KYC training once a year and as soon as any new joiners start with a company.

Any non-compliance with the Act in relation to the above-mentioned can result in a fine of R10 million and 5 years in prison.

So, if you don't want to be a jailbird, ensure your training procedures are in place or give us a shout to provide you with training at: hello@horizoncompliance.co.za.