What is FICA?
FICA is the Financial Centre Intelligence Act no 38/2001 (the Act) which came into force on 3 December 2001
What is the reason for the Act?
To help prevent financial crime such as money laundering, fraud and terrorist financing.
Who enforces the provisions of the Act and oversees it?
The Financial Intelligence Centre (FIC) created in terms of the Act.
How is the rationale behind the Act given effect to ?
Any person or entity entering into a financial transaction has to be aware of the identity of the person/s they are dealing with, that they are able to verify their legitimacy and to report any suspicious activity on the part of that entity to the FIC.
How does this verification take place ?
1. Individuals : the proposed client’s identity is verified with reference to his identity document. In addition the client’s residential address must be provided together with acceptable documentation substantiating that information.
2. Artificial entities (companies, trusts etc.) : the relevant registration documents evidencing the entity’s existence must be provided together with proof of it’s operating address. The identity and residential addresses of the entity’s directors, members, trustees etc. must also be verified. Anyone purporting to act as an entity’s agent is required to provide proof of his authority. His identity and address must also be verified .The ultimate beneficial ownership of that entity must also be established. This goes to the heart of the reason for FICA as entities are often formed for the sole purpose of hiding illicit funds..
3. Included in the above is a due diligence enquiry which must be undertaken to determine the nature of the client’s business and the purpose and length of his proposed relationship with the service provider.
On whom does this obligation fall ?
Accountable institutions which includes banks, financial service providers, attorneys, property practitioners, accountants, insurers, casinos, high value goods dealers and crypto asset service providers. The FIC publishes a list of accountable institutions in schedule 1 to the Act
What are an accountable institution’s other obligations ?
- To register with the FIC,
- To provide the FIC with regulatory reports,
- To scrutinize the lists published by the FIC from time to time indicating persons or entities that are persona non grata.
- If the accountable institution is a business, to implement a written compliance programme setting out procedures to be followed when vetting a client and how to detect suspicious transactions. The programme must be kept available for inspection by the FIC.
What are the consequences of non compliance with the Act ?
- Delayed transactions
- Refusal of service by financial or legal institutions
- Frozen bank accounts
- Fines imposed by the FIC which can be as high as R 10m for individuals and R 50m for legal institutions
- Criminal prosecution in extreme cases
What are typical transaction making FICA applicable ?
- opening a bank account,
- applying for finance,
- buying or selling immovable property,
- using the services of professionals such as attorneys, accountants or property practitioners.
FICA is therefore a very pervasive law, strict adherence to which is clearly required. This legislation is not unique to South Africa. It is a part of global anti money laundering measures, most countries across the world being exposed to financial malfeasance.
(Author: Russell Loftus)