Additional reporting requirements to curb money laundering kicks in

The effects of recent legislative changes to tighten South Africa’s control over money laundering and terrorist financing activities is starting to take shape.

The first deadlines for newly recognised accountable institutions to submit their risk and compliance returns to the Financial Intelligence Centre (FIC) are looming.

n terms the FIC’s Directive 6, legal practitioners, estate agents, people providing gambling activities and people who transact on behalf of a company, foreign company or a trust must submit their risk and compliance reports by the end of May.

By the end of July credit providers, the South African Postbank, high-value goods dealers, the South African Mint, and crypto asset service providers must file their risk and compliance reports in terms of Directive 7.

In addition, Directive 8 obliges all accountable institutions to screen their employees for competence and integrity and to scrutinise their information to identify, assess, mitigate, and monitor the risk of money laundering, terrorist financing and proliferation financing.

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Administrative sanctions

Failure to comply with these directives could result in administrative sanctions, ranging from a reprimand to the restriction or suspension of certain business activities, or a financial penalty of up to R10 million for individuals or R50 million for companies.

Tracy-Lee van Rensburg, director at Werksmans Attorneys, says following last year’s amendments to the Financial Intelligence Centre Act (Fica) these newly added accountable institutions had to register, appoint a compliance officer, establish a risk management and compliance programme, and implement policies and procedures to comply with the act.

Accountable institutions are required to undertake an in-depth analysis of their operations, policies and processes in order to complete the relevant risk and compliance returns. They must implement additional processes to screen all their employees.

The accountable institution must then submit all this information to the FIC, which will analyse it to assess the level of compliance with its obligations under Fica. The information will also assist the FIC in identifying shortcomings, and if necessary, to further investigate the accountable institution’s operations.

“It is going to be a challenge for these newly recognised institutions to meet the deadlines. Fulfilling the obligations under the different directives will be time consuming,” says Van Rensburg.

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Screening records

Accountable institutions are required to record the manner in which screening of both current and prospective employees is done. Records must be retained of the outcome of all screenings undertaken and records must be kept on how employee information was scrutinised against targeted financial sanctions lists.

The FIC has published and maintains a sanctions list that contains the identities of persons and entities that have been identified as being sanctioned persons or entities.

The FIC requires accountable institutions to freeze the property and transactions of those persons or entities that have been included in a targeted financial sanctions list.

Van Rensburg adds that the FIC and any supervisory body appointed by the FIC shall be entitled to request access to these records.

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That list

Ultimately, these are all additional steps focused on working towards the removal of South Africa from the Financial Action Task Force (FATF) grey list.

Countries that are on the global money laundering and terrorist financing watchdog’s grey list are under increased monitoring due to certain deficiencies in their anti-money laundering, combatting the financing of terrorism, and proliferation financing framework.

SA was placed on the list in February, and is now in the company of countries like Panama, Nigeria, Mali and the Cayman Islands.

The implementation of the additional obligations and extension of the scope of accountable institutions are all steps aimed at improving the anti-money laundering measures currently in place in South Africa.

Failure to satisfy the FATF that our framework is watertight could result in the country being moved to the black list. There are currently three countries – North Korea, Iran and Myanmar – on the black list.

This article originally appeared on Moneyweb and was republished with permission.
Read the original article here.