The Financial Intelligence Centre Act of 2001 (“FICA”) was amended by the Financial Intelligence Centre Amendment Act of 2017 (the “Amendment”), which provided for certain provisions of the Amendment to come into effect. On 1 April 2019, other provisions of the Amendment came into effect.
The Amendment has extended the objectives of the Financial Intelligence Centre (“FIC”) to provide for the additional sharing of information in order to assist in the implementation of financial sanctions, as well as to administer measures pursuant to resolutions adopted by the United Nations Security Council. The Amendment also provides for the provision of guidance to accountable institutions by FIC in relation to the freezing of property and transactions pursuant to resolutions adopted by the United Nations Security Council (“UN Security Council”) and provides for a concept known as “monitoring orders”, which provides for access to information on suspicious and unusual transactions.
Extension of the FIC’s objectives
The Amendment has extended the objectives of the FIC to assist in the:
- identification of proceeds of unlawful activities;
- combatting of money laundering activities and the financing of terrorist and related activities;
- implementation of financial sanctions pursuant to resolutions adopted by the UN Security Council;
- administration of measures which require accountable institutions to freeze property and transactions pursuant to financial sanctions that may arise from resolutions adopted by the UN Security Council (section 3(1) and section 3(2)(aA)).
In order to achieve its objectives, the FIC is now also required to provide information and guidance to accountable institutions that will assist the accountable institutions in meeting requirements to freeze property and transactions pursuant to UN Security Council resolutions (section 4(cA).
Prohibition on engaging with persons or entities identified in a UN Security Council Resolution
The Minister of Finance (“Minister”) is now required to announce the adoption of a resolution by the UN Security Council providing for financial sanctions, which entail the identification of persons or entities against whom member states must take specified actions against (section 26A).
Once the Minister announces the resolution adopted by the UN Security Council, no person may, directly or indirectly, in whole or in part, and by any means or method:
- use, acquire, collect, possess or own property;
- provide or make available, or invite any person to provide or make available property, any financial or other service, economic support; or
- facilitate the acquisition, collection, use or provision of property, any financial or other service, or economic support, of a person or entity that has been identified pursuant to a resolution (section 26B). Failure to comply with section 26B is an offence (section 49A).
Notwithstanding the above, the Minister may permit a person to conduct financial services or deal with such property in limited instances listed in section 26C.
Reporting to the FIC
Where an accountable institution is in possession or control of property owned or controlled by or on behalf of certain persons or entities (such as a person or entity identified in a UN Security Council resolution, it must, within 2 business days as contained in Guidance Note 05B, report this to the FIC (section 28A). Failure to report to the FIC is an offence and may also be subject to an administrative sanction (section 51A(1) read with section 51A(4)).
A person who carries on or is in charge of a business, or who is employed by a business and who knows or ought reasonably to have known or suspected that transaction(s) to which the business is a party to, relates to a person or entity that has been sanctioned in terms of section 26B, must within the prescribed time, report such knowledge or suspicion and the particulars to the FIC (section 29(1)(b)(vi)).
Further due diligence
An accountable institution is further obliged to regularly scrutinize its information to determine whether any of its clients have been sanctioned and failure to do so is an offence may also be subject to an administrative sanction (section 28A(3) read with sections 51A(3) and 51A(4)).
The FIC may apply to a designated judge for an order for an accountable institution to report to the FIC, on the terms and in the manner contained in the order, of all transactions concluded by a specified person or account. Such monitoring orders can only be obtained in certain specified circumstances, such as where there are reasonable grounds to believe that the person has transferred or will transfer the proceeds of unlawful activity to the accountable institution (section 35).
The offences are consequently subject to penalties which may be up to 15 years of imprisonment or to a fine not exceeding ZAR 100,000,000 (section 68).
What does the new development mean for companies?
With the enactment of the Financial Intelligence Centre Amendment Act of 2017, companies have to be aware of the following:
- The FIC’s objectives have been amended;
- There is a prohibition on engaging with persons or entities identified on a resolution by the UN Security Council;
- Accountable institutions have further reporting obligations;
- Companies have further reporting obligations; and,
- The FIC may apply for a monitoring order in relation to accountable institutions.
Companies must ensure that they do not engage with persons or entities identified in resolutions adopted by the UN Security Council.
Companies, that are accountable institutions, must comply with the reporting obligations to the FIC in relation to persons or entities that have been identified on resolutions adopted by the UN Security Council.
Companies must ensure it notifies the FIC where it suspects that transactions may involve a person or entity that has been sanctioned by Companies, that are accountable institutions, are required to ensure that its clients are not persons or entities that have been identified by a UN Security Council resolution.