The Financial Intelligence Centre (FIC) contributed to the recovery of more than R5 billion in proceeds from criminal activities in its 2021/22 financial year, a 51% increase from the R3.3bn recovered in the previous year, according to the FIC’s 1 April 2021 to 31 March 2022 annual report released last week.
The Centre blocked R204.4 million as suspected proceeds of crime in 2021/22. This was 66% lower than the R613.2m blocked in 2020/21, although it was still well up on the proceeds blocked in the financial years between 2016/17 and 2019/20.
The FIC has the power to block or freeze funds that are suspected to be the proceeds of crime. It can issue a section 34 directive to instruct an institution not to proceed with a transaction for 10 days. This allows the FIC to make enquiries about the transaction and, where necessary, to inform an investigating authority or the National Director of Public Prosecutions. The FIC also shares this information with the Asset Forfeiture Unit, which can seize the funds if necessary.
In 2021/22, the FIC issued 240 section 34 directives, up from 184 in 2020/21.
At the end of March, 45 555 institutions were registered with the FIC, up from 44 499 in March 2021. These institutions include the accountable and reporting institutions listed in Schedule 1 and Schedule 3, respectively, on the Financial Intelligence Centre Act, as well as business entities with reporting obligations in terms of section 29 of Fica and voluntary disclosure reporters. Section 29 requires businesses to report suspicious or unusual transactions or activities.
These 45 555 institutions filed more than 5.12 million regulatory reports in 2021/22 (2020/21: 5.24 million), including 533 277 (2020/21: 394 709) suspicious and unusual transaction reports.
The banking sector was the largest contributor of regulatory reports, filing close to four million cash transaction threshold reports and 379 363 suspicious and unusual transaction reports in 2021/22. Section 28 of Fica requires accountable and reporting institutions to report cash transactions of R25 000 or more to the FIC.
Using the regulatory reports that it received from accountable and reporting institutions and other data, the FIC produced 3 114 financial intelligence reports during 2021/22 for use by law enforcement and other authorities in their investigations, prosecutions and applications for the forfeiture of assets.
To assist various institutions in identifying, mitigating and managing their money laundering and terrorist financing risks, the FIC published risk assessment reports on seven sectors, including property practitioners, legal practitioners and gambling institutions.
Inspection reports and sanctions
The FIC and supervisory bodies are authorised to conduct inspections to ascertain whether Schedule 1 and 3 institutions are meeting their compliance obligations. The FIC and supervisory bodies issued 1 143 inspection reports in 2021/22.
Of the 1 143 inspection reports, 404 were issued by the FIC. The top three business sectors in respect of which the reports were issued were legal practitioners (223), motor vehicle dealers (102), and trust companies and administrators (36).
The FIC, the Prudential Authority (PA) and the FSCA imposed financial penalties for non-compliance to the value of more than R41.68 million, excluding those sanctions under appeal. Of the total of 37 sanctions imposed, seven went on appeal.
The FIC imposed sanctions on 23 entities that were not subject to appeal, with fines totalling more than R28.14m. The PA and the FSCA imposed sanctions on eight entities that did not go on appeal. The value of the sanctions was R13.54m.
‘Improved financial intelligence’
In his foreword to the annual report, Finance Minister Enoch Godongwana said that by fulfilling its mandate in identifying the proceeds of crime and assisting in combating money laundering and the financing of terrorism, the FIC continued to fulfil its primary role of protecting the integrity of South Africa’s financial system and making it intolerant to abuse.
He said collaboration between the Fusion Centre and the South African Anti-Money Laundering Integrated Task Force’s (Samlit’s) tactical operations groups was leading to more comprehensive and improved financial intelligence being produced for law enforcement agencies to use in their investigations and applications for asset forfeiture.
The Fusion Centre is a public-private collaboration dealing with matters related to corruption and money laundering.
Samlit is a FIC-led public-private partnership of domestic and foreign banks in South Africa, banking industry representatives and regulatory authorities that share financial information and build expertise to solve financial crime.
Godongwana said the Fusion Centre and Samlit have shown “real successes” in helping to fight fraud and corruption regarding the misuse of Covid-19 relief funds.
In the two years since its inception, the Fusion Centre collaborative partnership of law enforcement agencies and other authorities preserved and recovered about R1.75bn in criminal assets. In the Samlit collaboration space, successful interventions led to the preservation and directives issued to the amount of R86m over the same two years.
Click here to download the FIC’s 2021/22 annual report.
