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#FicaBill: Gigaba signs SA's financial crimes law

Business Report
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File picture: Matthew Jordaan/Independent Media
The Minister of Finance Malusi Gigaba has signed and gazetted the coming into operation of various provisions of the Financial Intelligence Centre Amendment Act, 2017 (Act No. 1 of 2017) (“FIC Amendment Act”).
The FIC Amendment Act was signed into law by the President on April 26, 2017 and gazetted on May 2, 2017 (Annexure A), but the determination of the commencement date was left to the minister of finance.
Commenting on the signing of the Act, minister Gigaba said it was critical for government to accelerate the implementation of the Act as it demonstrated government’s commitment to the fight against corruption, money laundering and illicit flows.
The minister added that although the signing of the Act was a big step forward, more work still needed to be done.
The key objective of this law is to improve the protection of the the integrity of South Africa’s financial system and strengthen its ability to prevent and punish financial crimes like money laundering, illicit capital flows, tax evasion, corruption and bribery, and financing of terrorism.
This law achieves the above objective by placing the risk‐based approach at the centre of South Africa’s Anti-Money Laundering (AML) and Combating the Financing of Terrorism (CFT) regime. It recognises that the risk of money laundering and terrorist financing can vary by individual,business sector and within sectors. The risk-based approach incorporates three key elements:
a) Strenthening AML/CFT through a more consultative approach based on partnerships between key stakeholders in both the public and private sectors.
b) Improving co-ordination and collaboration to ensure more effective preventive and better enforcement measures.
c) More customer-friendly and cost-efficient approach to the implementation of AML/CTF in line with the Treat Customers Fairly initiative.
The law also introduces the following new concepts and approaches to the implementation of the Financial Intelligence Centre Act, 2001 (FIC Act);
(a) Full range of customer due diligence (CDD) requirements which are focussed on understanding customers better rather than simply identifying and verifying their identities.
(b) Customer-Friendly approach based on a risk-based CDD enables efficient utilisation of resources and should make compliance easier for low risk clients.
(b) Beneficial ownership, which requires institutions to know and understand the natural persons who ultimately own or exercise control over legal entities or structures.
(c) Prominent (Influential) Persons and “Politically Exposed Persons”, which requires institutions to better manage risks relating to relationships with prominent persons.
(d) Freezing of assets, in terms of targeted financial sanctions against persons identified by United Nations Security Council in terms of various sanctions regimes.
The implementation of different provisions of the FIC Amendment Act will start on different dates;
June 13, 2017, October 2, 2017 and dates to be determined after October 2, 2017 (but expected to be no later than the end of 2018).
The first set of provisions commences on Thursday. These provisions do not require changes to existing regulations, exemptions or internal systems of institutions to enable compliance with the FIC Act.
The provisions deal mainly with information sharing, consultation arrangements, constitutional concerns relating to inspection powers, and improved functioning of the FIC Act Appeal Board.
The second set of provisions will commence on 2 October 2017. These provisions, which give effect to the above-mentioned new concepts and approaches, will require changes to existing regulations and exemptions under the FIC Act, as well as staff training and major changes to systems by supervisors, the Office of the Chief Procurement Officer, and accountable institutions.
Further, a move to a risk-based approach, which modernises the manner institutions undertake customer due diligence, implies less regulations but necessitates more guidance to clarify the expectations of supervisors on how institutions should appropriately implement the legislation.
The accelerated implementation of the FIC Amendment Act demonstrates Government’s commitment to fight corruption, money laundering and illicit financial flows.
The commencement of the FIC Amendment Act, both today and on 2 October 2017 confirms South Africa’s commitment to improve compliance with the Financial Action Task Force international standards in respect of measures on foreign Politically Exposed Persons, Beneficial Owners and record keeping. South Africa is expected to report on progress on these measuers to the FATF Plenary next week and possibly October 2017.
BUSINESS REPORT ONLINE
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