Latest Fica amendments: 5 key takeaways for accountable institutions

In a recent article, Krevania Pillay and Tiffany Alves of law firm Cliffe Dekker Hofmeyr highlight five key amendments to the Financial Intelligence Centre Act (Fica) brought about by the General Laws (Anti-Money Laundering and Combating Terrorism Financing) Amendment Act.

1. Beneficial ownership

Central to the Amendment Act is the obligation placed on accountable institutions to determine ultimate beneficial ownership. This obligation extends to ascertaining the natural person who ultimately owns or exercises effective control of an AI’s client or of a legal person that, in turn, owns or exercises effective control of an accountable institution’s client, according to Pillay and Alves.

Legal persons contemplated in the Amendment Act include partnerships and trusts.

“The additional measures that accountable institutions are required to implement relating to partnerships and trusts include taking reasonable steps to establish the identity of the beneficial owner of legal persons, in circumstances where a partner in a partnership or a founder, trustee or beneficiary of a trust is a legal person,” they said.

2. Implications for risk management and compliance programmes

The amendments to section 42 of Fica include ensuring, in circumstances where the operations of accountable institutions are in foreign jurisdictions, the implementation of additional measures to manage risk in circumstances where foreign laws do not permit the implementation of Fica’s prescripts abroad, particularly in higher-risk jurisdictions.

They also require the implementation of group-wide programmes addressing, among other things, information sharing at an organisational level in circumstances where accountable institutions comprise of several South African branches.

“Accountable institutions are required to exchange information regarding identified suspicious or unusual transactions and activities. This would ensure that the one hand is talking to the other and that accountable institutions effectively communicate identified suspicious activity to all branches (operating in different locations) to help stay ahead of the curve when it comes to trends in financial crime,” Pillay and Alves said.

3. Enhanced powers for the FIC

The Financial Intelligence Centre (FIC) will be producing forensic evidence (presumably in enforcement proceedings) pertaining to the flow of financial transactions and corresponding links between persons and property.

The FIC can also enter public-private partnerships and, critically, request information from organs of state. The Centre can enforce compliance in circumstances where a relevant supervisory body fails to enforce compliance despite its recommendation, Pillay and Alves said.

4. ‘Politically exposed persons’

The Amendment Act took a red pen to provisions relating to “prominent influential persons” and replaced them with the more common and internationally aligned parlance of politically exposed persons, Pillay and Alves said.

Schedule 3A, previously listing “domestic prominent public officials”, now lists “domestic politically exposed persons” instead.

The amendment is more form over substance, as all the usual suspects still appear. However, the limitation placed on prominent positions held in international organisations based in the “Republic only” has been disposed of.

Schedule 3B, previously listing “foreign prominent public officials” now lists “foreign politically exposed persons”. Again, all the VIPs were invited to the party.

To address the Financial Action Task Force’s critique, both schedules have done away with the outer time limit applicable to holding a prominent position, previously “the preceding 12 months”, as a factor to determine politically exposed status. This may result in AIs having to apply enhanced due diligence measures for a multitude of their existing clients due to prominent roles held decades ago.

Prominent influential persons have not been altogether banished, though. These were transplanted from Schedule 3A and can be found lurking in Schedule 3C, which targets private sector actors. The outer time limit applicable to holding a prominent influential position remains unchanged as “the preceding 12 months”, Pillay and Alves said.

5. Information-sharing

The investigative division of the Auditor-General has been included in the definition of “authorised officers” contemplated in Fica. The above inclusion ties in with, among others, the FIC’s information-sharing function to make information it collects and produces available to investigative bodies to facilitate law enforcement, Pillay and Alves said.

Not to reveal its entire hand, certain safeguards are in place to restrict access to information by authorised officers to circumstances where the FIC reasonably believes such information is required to investigate suspected unlawful activity.

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