FICA ensures that criminals cannot use South Africa’s financial system to commit crime or hide its proceeds
FICA, the Financial Intelligence Centre Act, is South Africa’s primary anti-money laundering and counter-terrorism financing legislation. This Act sets out a regulatory framework for South Africa’s anti-money laundering and counter financing of terrorism programmes. The Financial Intelligence Centre (FIC) is the supervisory body responsible for overseeing compliance with this Act.
What does FICA do?
South Africa is a member of the Financial Action Task Force (FATF), an international body tasked with setting best practices to combat money laundering and terrorism financing and has also ratified the United Nations Convention Against Corruption. As a member of the FATF, South Africa is implementing the organization’s policies and procedures in its own domestic legislative system by way of the FICA.
FICA gives the FIC oversight over banks, financial institutions, estate agents, brokers and other intermediaries in the financial system operating in South Africa. The FIC monitors South Africa’s financial markets and institutions, issues registrations for participants in the industry and also conducts periodic audits to ensure ongoing compliance with the Financial Intelligence Centre Act.
Who must comply with FICA?
An 'accountable institution' is any person defined in schedule 1 of the Act. Amongst those listed include attorneys, trustees and executors, estate agents, financial instrument trade and stock brokers, management companies and bankers, to name but a few.
What documentation is required?
Depending on the type of transaction, individuals and/or entities are required to provide documentation such as a copy of their South African identity document, proof of residential address, SARS tax number, company registration documents, shareholder data etc.
FICA Amendment – Know Your Customer
The Financial Intelligence Centre Amendment Act, 2017 (FIC Amendment Act) came into effect on 2 October 2017 and has forced ‘accountable institutions’ to move to a risk-based (rather than a rules-based) approach. This amendment introduced new processes to determine if there are specific money laundering or terrorist financing risks associated with new client relationships. These processes include the following:
Know-Your-Customer (KYC) or Customer Due Diligence (CDD): An accountable institution also needs to ‘get to know’ its client, notably by gathering sufficient information to mitigate potential risk exposure.
Flexible rules-based approach: The previous approach has been made more flexible, so that an accountable institution may now decide for itself what further documentation it may require, in addition to the standard proof of identity and address.
Beneficial ownership: Accountable institutions are required to know and understand which natural persons ultimately own or exercise control over legal entities or structures, and who receives benefits from such entities.
Risk management and compliance: Accountable institutions have to develop, document, implement and maintain a risk management and compliance programme (RMCP), which now replaces the FICA Internal Rules of the Organisation that were required in the original Act.
PPOs and PIPs: The Act introduces the concept of foreign prominent public officials (PPOs) and local prominent influential persons (PIPs), previously referred to as politically exposed persons (PEPs). As a result of their prominent public position, there may be an increased risk in such persons being involved in bribery and corruption and the consequent laundering of the proceeds of any such activity. Business relationships with PPOs are automatically deemed high risk, whereas business relationships with PIPs are not automatically deemed high risk.
Transactional monitoring: An accountable institution is required to sufficiently understand every transaction taken throughout a business relationship. It has to ensure that client information is accurate and that all actions in the business relationship are consistent with the information provided by the client.
Record-keeping: Accountable institutions are obliged to keep CDD records, including documentation relating to transactions, for five years from the date on which the business relationship was terminated.
FICA and MacRobert
MacRobert is an "accountable institution" in terms of FICA and the Act contains very specific compliance requirements for adherence to all the obligations imposed by FICA and its regulations.
Whilst it may not always be convenient to our clients to comply with our identification and verification process, we are not permitted to establish a business relationship or conclude a transaction with a client unless these prescribed steps have been undertaken.
