As Moonstone has previously reported, all accountable institutions must screen their prospective and current employees. This requirement is contained in Directive 8, which the Financial Intelligence Centre (FIC) published in the Government Gazette on 31 March.
Read: FIC issues employee screening directive to accountable institutions
Employers that are accountable institutions must periodically screen employees for competence and integrity, to identify, assess, monitor, mitigate and manage the risk of money laundering, terrorist financing and proliferation financing.
They must also scrutinise employee information against the targeted financial sanctions lists, to determine whether a prospective or current employee is on the list.
The FIC issued Public Compliance Communication 55 (PCC 55) to provide guidance to accountable institutions on how to apply Directive 8.
Directive 8 and PCC 55 state that employee screening should be done in compliance with labour legislation.
The provisions of the Protection of Personal Information Act also apply when screening employees in terms of Directive 8 and PCC 55.
To comply with Directive 8 and PCC 55, employers need to review their recruitment processes, employment contracts, and their policies and procedures to assess whether they comply with the requirements of Directive 8 and PCC 55, say Prencess Mohlahlo and Reitumetse Sebatana, of the employment practice at ENSafrica.
Directive 8 and PCC 55 set the minimum standard for screening for competence and integrity. Where an employer already applies a higher standard than what is required, the FIC encourages them to continue applying that higher standard, say Mohlahlo and Sebatana.
They advise accountable institutions to take the following into account when screening employees.
Avoid unfair discrimination
Employees and applicants for employment are protected from unfair discrimination by the Employment Equity Act (EEA). This prohibits direct or indirect unfair discrimination in any employment policy or practice based on any listed or arbitrary ground. However, it is not unfair discrimination to distinguish, exclude, or prefer any person based on the inherent requirements of the job, ENSafrica says.
Screening for competence
PCC 55 guides employers on how to screen employees’ competence. This can be done by screening an employee’s previous employment history, references, qualifications, and relevant accreditations, ENSafrica says.
In doing so, an employer must keep in mind that, in terms of the EEA, a person may be suitably qualified for a job through a formal qualification, prior learning, relevant experience, or the capacity, within a reasonable time, to acquire the ability to perform the job. (If a person would not be able to acquire the ability to perform the job without a formal qualification, such a condition would be justifiable.)
On this note, employers must not underestimate the importance of screening when employees possess the qualifications and accreditations they claim to have. An example of how important this is was demonstrated in the Labour Court decision in LTE Consulting (Pty) Ltd v CCMA and Others, where the employer discovered that its financial manager, who claimed to hold certain qualifications be a chartered accountant (CA), was not a CA and did not hold any of the qualifications. The employee was dismissed, and the Labour Court upheld the dismissal, ENSafrica says.
If an employer uses psychological or similar assessments in screening employees, it must ensure that the assessments have been scientifically shown to be valid and reliable, can be fairly applied to employees, and are not biased against any employee or group, the law firm says.
Conducting criminal history checks
PCC 55 also guides employers on how to screen employees for integrity, which may be done by conducting criminal history checks for dishonesty or financial crimes.
In order not to fall foul of the EEA, employers must be able to justify disqualifying an employee or applicant for a job because of a criminal record, by considering factors such as the nature of the crime, its relevance to the job, time since conviction, evidence of rehabilitation, the circumstances under which the crime was committed, the requirements of the job, and the nature of the employer’s business, ENSafrica says.
Where an employer has required an employee to disclose whether they have a criminal record and are dishonest, the employer is not without recourse.
In G4S Secure Solutions (SA) (Pty) Ltd v Ruggiero NO and Others, when applying for a position, the employee was asked: “Have you ever been convicted of a criminal offence?” The employee indicated that he had not. Fourteen years later, when applying for promotion, the employer conducted a criminal record check and found that the employee had been convicted of a criminal offence. The employer dismissed the employee.
The case came before the Labour Appeal Court, which upheld the employer’s decision to dismiss the employee and held that the misrepresentation made by the employee was blatantly dishonest, and the employer was entitled, as an operational imperative, to rely on honesty and full disclosure by its employees.
ENSafrica says this case underscores the importance for employers continually to screen employees, per Directive 8 and PCC 5, and not only at the start of employment. Continuous screening can uncover missed information during recruitment or undisclosed conduct and information during an employee’s employment.
Risk-based decision and fair process following an adverse finding
An accountable institution must make a risk-based decision based on the outcome of the screening process to mitigate and manage the risk of financial crimes that may arise within its institution. The nature of the decision will vary according to each institution based on an assessment of the operational risk, the level of exposure it creates, and the position occupied by the employee, ENSafrica says.
When acting against an employee, employers must respect an employee’s right to fair treatment and guard against unfair dismissal. To do this, employers must ensure a fair process by granting the employee an opportunity to be heard before making a decision. An employer may mitigate risk in various ways, such as suspending the employee as a precaution pending investigation or taking disciplinary action if there is evidence of misconduct, ENSafrica says.
In Nogcantsi v Mnquma Local Municipality and others, the employee’s contract of employment stated that the job offer was subject to a “vetting and screening process”, and the contract would automatically terminate if the outcome of the screening process was negative. The screening disclosed that the employee had a pending criminal case for defeating the ends of justice and attempted murder.
The Labour Appeal Court found that a negative outcome to the screening process was material to the candidate’s suitability for the role and the automatic termination of employment was permissible in terms of law.
Additional screening measures
It is important, however, to note that there may be circumstances where the adverse findings in respect of an employee do not necessarily constitute misconduct within the employer’s workplace. For example, PCC 55 provides that employers must implement additional screening measures in respect of positions that pose a higher risk, such as screening for whether an employee is a national of a high-risk terrorist financing or proliferation financing geographic area, ENSafrica says.
In these circumstances, an employer may assess whether the finding renders the employee incapable of performing their job, or whether the operational requirements of the employer require the dismissal of such an employee. Again, in conducting these assessments, employers must ensure that they do not unfairly discriminate against employees based on any of the listed or arbitrary grounds in terms of the EEA and that they follow a fair process, the law firm says.
There are many other considerations that employers must consider when applying the screening requirements of Directive 8 and PCC 55, and it is advisable that employers seek legal advice before taking any action.
