Joint Communication 2 of 2020: COVID-19 Supervisory response, addressing various aspects under the FIC Act, was published last week.
The communication confirms that there will be no relaxation of the Accountable Institutions (AIs) obligations under the FIC Act and all AIs are reminded to be extra vigilant during this period of COVID-19 for situations and matters that can increase changes of money laundering and terrorist financing (ML/TF).
In particular, attention must be given to paragraph 4.8 to 4.11 of the communication that relates to the ongoing due diligence obligation in terms of section 21 of the FIC Act.
| ● | Where ongoing diligence needs to be performed during the business relationship with a client, priority has to be given to the medium to high risk clients. | |
| ● | Where the risk management and compliance programme (RMCP) of the AI determines that face-to-face obtaining and verification methods form part of their ongoing due diligence processes performed on medium to high risk clients, and this could not have been completed for the periods between 1 March 2020 to 4 May 2020, due to COVID-19 related matter, the Authority does not expect AIs to: | |
| ○ | Freeze accounts/assets, or | |
| ○ | Terminate the business relationship due to this failure of completion. | |
| ● | AIs whose RMCP does require face-to-face obtaining and verification as part of the ongoing due diligence process will be required to develop a plan that will address how ongoing due diligence is to be performed on their medium to high risk clients on whom this ongoing due diligence could not be performed. | |
Face-to-face verification, entails that the client and/or original of a document, forming part of the due diligence process is seen in person. Parties to the interaction/transaction are therefore in the same physical location and conduct their activities by physical interaction. Non-face-to-face interactions are considered to occur remotely, meaning the parties are not in the same physical location and conduct activities by digital or other non-physically-present means, such as mail or telephone.
In summary, the plan as required in terms of Joint Communication 2 of 2020:
| ● | Will be for the period 1 March 2020 to 4 May 2020. |
| ● | Must cover clients affected between 1 March 2020 and the end of the hard lockdown, being the clients in respect of whom ongoing due diligence could not be performed. |
| ● | Implementation of the plan will start after the hard lockdown (in respect of the affected clients). |
| ● | All outstanding due diligence must be completed by 4 December 2020. |
| ● | Such plans must be submitted to the responsible analyst in the Conduct of Business Division as it will form part of ongoing supervisory duties. |
| ● | It is recommended that technology be used as far as possible to conduct ongoing CDD (see section 4.8), with particular focus on medium to high-risk clients. |
Further clarity has been requested from the FSCA to address difficulties that may be experienced in performing face-to-face ongoing due diligence after 4 May 2020 and whether it can be inferred that the plan will find application to the affected clients, as specifically mentioned in the Joint Communication, and for any other clients to whom ongoing due diligence becomes applicable after 4 May 2020.
