A recent decision of the Appeal Board of the Financial Intelligence Centre Act (Fica) serves as reminder to all accountable institutions that the development of a risk management and compliance programme (RMCP) is the cornerstone of compliance with Fica.
The objective of Fica is, among other things, to help combat money laundering, the financing of terrorism, and other related activities. All accountable institutions designated under Fica are obliged to comply fully with its requirements.
At the end of last year, the FSCA imposed a fine of R870 000 on Jannie Parsons Future Financials (Pty) Ltd (JPFF) – a licensed FSP and an accountable institution under Fica – for failing to:
- verify the identity of 24 of 33 sampled clients;
- screen all 33 sampled clients against the relevant Targeted Financial Sanctions Lists;
- develop, document, maintain, and implement an RMCP for anti-money laundering and counter-terrorist financing; and
- identify, assess, monitor, mitigate, and manage the risks that the provision of its products or services may involve or facilitate money laundering, terrorist financing, and related activities.
In a media statement released last week, the FSCA said the administrative penalty was imposed after full consideration of the matter by the Authority, including the remedial steps taken by JPFF to address the various non-compliances.
The FSCA agreed to suspend R470 000 of the penalty for three years, on condition that JPFF remains fully compliant during this period, effectively reducing the penalty to R400 000.
JPPF subsequently lodged an appeal to set aside the FSCA’s decision, but on 17 July the Appeal Board dismissed the appeal in its entirety and found in favour of the FSCA.
Commenting on the Appeal Board’s findings, the FSCA said the decision emphasised that the failure of an accountable institution to develop, document, maintain, and implement an RMCP cannot be regarded merely as a bureaucratic or technical breach of the law.
“This requirement must be complied with irrespective of whether the institution believes that its clients and/or products are ‘low risk’ in nature. The risk profile of an institution’s client or product base is not a relevant factor for purposes of this requirement,” said the Authority.
JPFF provides niche finance and insurance products for the medical and aesthetics industry.
When Moonstone spoke to a company representative last week, the FSP shared that the incident referred to in the FSCA media statement occurred in 2018 during a period of company transition.
JPFF confirmed that the R400 000 fine had been paid and that when it came to meeting the requirements of Fica, the FSP now had its “pants, belt, and suspenders” on to ensure that all were met going forward.
Financial Action Task Force
The Appeal Board stated that, in terms of section 58(5)(c) of the Financial Sector Regulation Act, the FSCA must have regard to relevant international obligations when executing its supervisory functions.
This includes due consideration of the standards set by the Financial Action Task Force (FATF). The FATF is the global watchdog responsible for helping combat money laundering, terrorist financing, and related activities. It requires its member countries to effectively implement measures to detect and prevent misuse of the financial system for such activities. This includes imposing penalties or sanctions for identified breaches that are effective, proportionate, and dissuasive.
“The FSCA remains committed to its supervisory efforts in helping South Africa strengthen its fight against financial crime. Any non-compliance with the FIC Act will be met with appropriate regulatory action,” the Authority said.
Help is at hand
Accountable institutions need to understand their compliance obligations in terms of Fica – and should seek expert help if they do not.
Moonstone Compliance offers compliance, consulting, and training options for accountable institutions of all types and sizes to help them implement anti-money laundering procedures and meet the requirements of Fica.
Moonstone Compliance will explain the complex regulations and offer practical recommendations tailored to your business.
We provide a wide range of services, from providing documentation to implementing a full compliance framework. You can select a combination of services and have them customised to suit your needs.
Click here to read more about Moonstone Compliance’s suite of Fica services or send us an online enquiry.
