Fica money in water

Financial Intelligence Centre Amendment Bill – Back to basics

The Financial Intelligence Centre Amendment Bill [B33-2015] was published for comment on 29 April 2015. The parliamentary process is complete and the Bill is now awaiting presidential assent. Little has been made of this Bill in the media, perhaps because the changes envisaged by the Bill has no apparent nor immediate impact on ordinary consumers.

For accountable institutions (identified in FICA), however, the Bill is a call to action. It is an opportunity for businesses to take ownership of their processes to combat money laundering and terrorist financing activities. Merely ticking the boxes will no longer suffice.

Since its inception in July 2003, the Financial Intelligence Centre Act, 38 of 2001 (“FICA”) has been really good at getting accountable institutions to store loads of personal information they collected from ordinary customers, and perhaps less effective at preventing and detecting money laundering activities. The Bill intends to assist accountable institutions to concentrate their resources more effectively to address the risks, specific to their business, that their products or services may be abused for illicit purposes.

The compulsory Risk Management and Compliance programme introduced by the Bill is crucial in achieving more effective laundering prevention and detection. Accountable institutions must identify, assess and analyse those areas of their business where the risk of money laundering and terrorist financing activities are the greatest, and take appropriate steps to mitigate against such risks. This requires them to carefully consider their customers, products and services, transaction values, delivery channels and various other factors, such as the duration of the customer relationship and the level to which the customer is already regulated.

The Bill refers to “customer due diligence” as opposed to the currently used “duty to identify clients”. The basic principles of customer due diligence are that accountable institutions:

  • may not transact with fictitious persons;
  • must identify the “beneficial owner” – being the natural person who either owns or controls a juristic person;
  • take enhanced measures for “domestic prominent influential persons” such as persons holding prominent public functions.
  • should understand the purpose and nature of the business relationship with a customer and predict the types of transactions that a particular customer is likely to undertake. With this in mind, the business relationship and transactions must be monitored on an ongoing basis.

An accountable institution will therefore have an amount of flexibility to design its approach to customer due diligence. It has to ensure that this approach is effectively implemented. This is achieved by, amongst other things, empowering and training its staff to monitor and identify unusual transactions. The Bill is indeed beneficial as it guides accountable institutions towards focusing on what really matters – combating money laundering.