When it comes to laws and regulations it’s all about being a law-abiding citizen, in other words, complying with them. These laws and regulations guide business operations and list best practices for pricing products and services.
Laws and regulations around businesses are not always about preventing people from doing things. Some are there to protect consumers from fraud and one of those laws is FICA.
The Financial Intelligence Centre Act (FICA) was introduced in 2021 to fight against financial crime such as money laundering, tax evasion and terrorist financing activities. The Act is there to make it harder for criminals to benefit from the proceeds of crime.
In this article, we look at FICA and give you the details on how it works and how you can comply.
What are FICA and FIC?
FICA was developed with the intention to:
- Establish a Financial Intelligence Centre (FIC) and a Money Laundering Advisory Council to combat money laundering and other financial crimes.
- To impose certain duties on institutions and other persons who might be used for money laundering.
- To amend the Prevention of Organised Crime Act (POCA) and the Promotion of Access to Information Act (PAIA).
Furthermore, FICA works in conjunction with the Protection of Constitutional Democracy Against Terrorist and Related Activities Act.
FICA empowers the Financial Intelligence Centre (FIC). FIC is South Africa’s financial intelligence unit. The organisation implements its role in the country’s framework for anti-money laundering, countering the financing of terrorism and proliferation (AML, CFT and CPF).
The FIC functions include:
- Receive regulatory reports, transactions and other data from accountable institutions.
- Interpret and analyse the received data.
- Produce financial intelligence from this data for the use of competent authorities in their investigations, prosecutions and applications for asset forfeiture.
- Produce forensic evidence based on how financial transactions flow.
- Exchange any information with bodies with similar objectives in other countries to combat money laundering, financial terrorism and proliferation financing.
- Facilitate effective supervision and enforcement by supervisory bodies.
How to be FICA-compliant
Here are some tips to ensure you stay compliant with FICA and the FIC.
Tip 1: Register with the FIC
Accountable institutions are required to register with the FIC. You can register on the FIC’s goAML EE online system.
Tip 2: Appoint an Anti-money Laundering or Combating Financial Terrorism Compliance officer
The senior management or board of directors of an accountable institution needs to formally appoint a compliance officer to ensure the company complies with FICA. The person appointed should be competent to ensure the effectiveness of the company’s compliance function.
Tip 3: Develop a Risk Management and Compliance Programme
Accountable institutions are required to use a risk-based approach when establishing a business relationship or conducting a transaction with a client. Part of this approach includes developing controls which mitigate and manage the company’s anti-money laundering risks and meet FICA requirements.
Additionally, all the controls developed and implemented should form part of the risk management and compliance programme (RMCP). The RMCP should be reviewed and updated continuously to ensure it remains effective and sufficient.
Tip 4: Customer Due Diligence
A vital part of mitigating risk is to perform customer due diligence. Customer due diligence is the process of analysing information about an individual from various sources. You will need to collect and evaluate specific information to get a better understanding of your customers and ensure they are being honest.
Due diligence also includes the following:
- Verifying the identity of an individual or the registration of a legal person, their address and location
- Getting information regarding the economic sector or occupation of the client
- Getting information regarding the nature and purpose of your client’s relationship with you
- Monitoring all transactions
- Develop a risk rating scheme to categorise your clients
- Check all data against third party data sources
- Identify sources of funds
- Identify whether your client, a related party, an authorised person or an Ultimate Beneficial Owner (UBO) is on a sanctions list or has appeared in any adverse media
- Identify if your client, a related party, an authorised person or UBO is a domestic politically exposed person or foreign politically exposed person and then carry out enhanced due diligence.
Tip 5: Submit Reports to the FIC
You are obligated to report any suspicious behaviour or transactions to the FIC. This includes cash transactions in excess of R 49 999. Reporting cash transactions is known as a cash threshold report. Other reports that can be submitted are known as suspicious transactions or suspicious activity reports.
These reports are submitted when there is a transaction or an activity by the client which appears to be suspicious or unusual. Lastly, another report that can be submitted is a terrorist property report. This report should be submitted when you suspect your client may have property belonging to a client linked to terrorism.
Tip 6: Keep a Record of Everything
FICA requires you to keep records of due diligence and details of transactions including any counterparties to those transactions. This is done to ensure evidence is available should the FIC or the authorities require it for an investigation or prosecution.
Your records need to be kept for a minimum of five years from the date when a client last transacts, when they stop being a client, when a report about them is submitted to the FIC or an active investigation is closed, whichever date is last. You can keep records on paper or digitally.
Tip 7: Training
Section 43 of the FICA says accountable institutions must provide ongoing training relating to anti-money laundering or countering the financing of terrorism to its employees. This is done to stay compliant with the provisions set out by the FICA and its internal RMCP.
Training is not optional and if you don’t provide training, you will be regarded as non-compliant with the Act and could face potential sanctions.
Following these tips you can ensure you stay compliant with FICA and the FIC. Remember, compliance is necessary especially if you want to stay operating and need funding.
To get more help on compliance, purchase a ticket to the SME SA Funding Summit today!
