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South Africa: Financial Intelligence Centre Act Amended

(May 25, 2017) On April 29, 2017, South African President Jacob Zuma signed into law the Financial Intelligence Centre Amendment Act, 2017, amending the Financial Intelligence Centre Act of 2001, an Act designed to “combat money laundering and the financing of terrorism.”  (Press Release, President Jacob Zuma Signs FICA Bill into Law, South African Government website (Apr. 29, 2017).)  The amending legislation will be implemented once the Minister of Finance gazettes a notice to that effect.  (Financial Intelligence Centre Amendment Act 1 of 2017 (FICA 2017), § 61, GOVERNMENT GAZETTE (May 2, 2017), South African Government website.)

Expansion of Objectives

The legislation expands the objectives of the Financial Intelligence Centre.  The principal objectives of the Centre, which under the 2001 Act were limited to assisting “in the identification of the proceeds of unlawful activities and the combating of money laundering activities and the financing of terrorist and related activities”, will now include “implementation of financial sanctions pursuant to resolutions adopted by the Security Council of the United Nations, under Chapter VII of the Charter of the United Nations.”  (Id. § 2; Financial Intelligence Centre Act 38 of 2001 (FICA), § 3 (Dec. 3, 2001), University of Pretoria website; U.N. Charter (Oct. 24, 1945), United Nations website.)

In addition, the Amendment Act expands the list of institutions to which the Centre will make information it collects available.  Under the 2001 FICA, one of the objectives of the Centre was to make such information available to “investigating authorities, supervisory bodies, the intelligence services and the South African Revenue Services.”  (FICA § 3.)  The legislation expands the list to cover the Independent Police Investigative Directorate, the Intelligence Division of the National Defence Force, a Special Investigating Unit, the office of the Public Protector, and an investigative division in an organ of state.  (FICA 2017, § 2.)    

Rules on Customer Identification and Due Diligence

In addition to those prescribed under the 2001 FICA, the amending legislation imposes rules on customer identification and due diligence.  It bans accountable institutions from establishing “a business relationship or conclud[ing] a single transaction with an anonymous client or a client with an apparent false or fictitious name.”  (FICA 2017, § 8.)  It requires every accountable institution to “develop, document, maintain and implement” a Risk Management and Compliance Programme (RMCP), “a program for anti-money laundering and counter-terrorism financing risk management and compliance.”  (Id. § 27.)  It states that a RMCP, among other duties, must:

(a) enable the accountable institution to—

(i) identify;

(ii) assess;

(iii) monitor;

(iv) mitigate; and

(v) manage,

the risk that the provision by the accountable institution of products or services may involve or facilitate money laundering activities or the financing of terrorist and related activities;

(b) provide for the manner in which the institution determines if a person is—

(i) a prospective client in the process of establishing a business relationship or entering into a single transaction with the institution; or

(ii) a client who has established a business relationship or entered into a single transaction;

(c) provide for the manner in which the institution complies with [the rule banning the creation of a relationship with a unanimous client or a client with an apparent false name.] (Id.) 

The Amendment Act imposes additional due diligence requirements on certain customers.  For instance, if the transaction or business relationship involves a juridical person, in addition to the due diligence requirements described above, the accountable institution, among other measures, must establish the nature of the client’s business, the ownership and control structure of the client, and the identity of the beneficial owner.  (Id. § 10.)  If the client is a foreign prominent public official (including head of state, member of a royal family, government minister, or high-ranking member of the military), or a domestic prominent public official, the accountable institution must, among other steps, “take reasonable measures to establish the source of wealth and source of funds of the client … and … conduct enhanced ongoing monitoring of the business relationship.”  (Id. Schedule 3B.)  The same scrutiny must be applied to family members or close associates of such prominent public officials (these include current or previous spouses, civil partners, or life partners; children, step-children, and their spouses or partners; parents; and close relatives by consanguinity or affinity.)  (Id.)