2017 / 09 / 30
Due to pressure to conform to global standards in the prevention and prosecution of terrorism financing and money laundering, the FIC (“Financial Intelligence Centre”) amendment Act was brought to life. It is set to fundamentally change how any party, as Accountable Institutions, is to enforce FICA/FIC. While the act is set to come into operation, in full, on the
2nd of October 2017, the good news is that there will be transition phases and a lot will still have to be done before rigorous enforcement of the act will become a reality.
The biggest change is the move away from the Rule Based System over to a Risk Based Approach. Accountable institutions will be obliged to do due diligence on all clientele in which we (as Accountable Institutions) will have to establish the risk that the client or the transaction poses. What this means is that, instead of having a standard checklist through which to work, now one will have to show to what extent one went to establish the following:
- the true identity of the client,
- the beneficial ownership in the client,
- whether there are any foreign prominent public officials or local influential persons involved.
- if certain financial sectors considered to be “targeted financial sectors” are involved.
Once the risk in the client and/or transaction is established each Accountable Institution will have to decide whether to report the transaction or not.
While this will in all probability increase the burden on accountable institutions by basically being the “operatives” of FIC, ones burden for regular, perceived low risk clientele, will be lessened. An Accountable Institution will be expected to continuously evolve their measures, procedures and staff training in establishing the risks involved and the steps taken to counter such risk. If you are faced with a charge by the Financial Intelligence Centre you will have the opportunity to explain how you perceived the risk, the measures put in place to nullify the risk and justify the decisions made.
As said the Act is still in its infancy and there will still be a lot of communication from the Financial Intelligence Centre.