FICA processes needed to keep watchful eye on new political elite

With a new political elite on their way, and two ministers from the sixth administration appearing in court for corruption, following FICA processes will help to keep a watchful eye in the battle against corruption in government.

Now that the votes for the 2024 general election have been counted, the Financial Intelligence Centre Act (FICA) and its mandate on firms to identify and monitor the activities of politically exposed persons (PEPs) is again under the spotlight, Hawken McEwan, director of compliance at DocFox, says.

“National elections are a challenge for institutions tasked with enforcing FICA. The dynamic political environment makes it tricky to spot and keep tabs on PEPs, individuals in powerful public positions or close to them who could be tempted to engage in shady financial dealings or abuse their newly found public status.”

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New faces are emerging, alliances are shifting and the stakes are high, he says. This means that regulatory bodies must be extra vigilant to identify a diverse range of individuals who might misuse their influence for personal gain during this critical period.

National election calls for FICA compliance

“A national election puts pressure on institutions to follow FICA guidelines diligently. Getting it wrong not only risks the integrity of their business and the financial system but also undermines public trust in the rules in place to address corruption.

“Accountable Institutions (AIs), those that have to comply with FICA, need to step up their game by training their staff continuously and improving their ability to spot potentially higher-risk individuals and activities.”

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McEwan says maintaining a list of politically exposed persons is extremely difficult in a changing landscape, but it serves a practical purpose by enabling firms to closely monitor individuals who might misuse public funds.

“By keeping a sharp eye on the activities of PEPs, firms can report anything suspicious and regulators can swiftly act on any potential financial wrongdoing.”

He points out that it is important to note that not only PEPs themselves but their family members and close associates must also undergo this additional scrutiny to prevent any attempts to circumvent the regulations by using the people around them to transact on their behalf.

FICA plays crucial role in combatting corruption

“In the fight against political corruption in South Africa, FICA plays a crucial role in combating financial crimes and protecting taxpayers’ funds. While FICA does not directly tackle corruption, the intelligence it gathers has been instrumental in supporting law enforcement efforts.

“Information FICA shared has led to the recovery of over R5.8 billion in criminal assets, showcasing its impact in fighting financial crimes and safeguarding public funds in the country.”

As South Africa strives to strengthen institutions, uphold transparency and escape the Financial Action Task Force’s greylist, monitoring politically exposed persons and their financial dealings is critical, he says.

“By proactively investing in compliance tools and remaining vigilant during the election season, organisations can adeptly manage the complexities of overseeing these influential figures. Watching PEPs closely is vital to prevent financial misconduct, protect public funds and foster a transparent financial system for all.”

McEwan says institutions must take proactive steps to enhance FICA compliance and cultivate a culture of integrity and ethical conduct within organisations as it is essential for compliance and avoiding illicit financial practices.