The Financial Intelligence Centre Amendment Bill, commonly known as the FICA Bill was signed into law during April 2017. The FICA Bill brings about amendments to the Financial Intelligence Centre Act 38 of 2001 (“FICA”), which aims at combatting money laundering and the financing of terrorism.
This signing of the FICA Bill has been received with great relief and acclaim from a wide spectrum of stakeholders, including the public, the banking sector (both local and foreign), and the business community. It was critical for the President to sign this Bill to ensure that South Africa can remain part of the international body known as the Financial Action Task Force (FATF). The main objective of this international body is to combat financial crime. As a member, South Africa is expected to conduct its business in line with the FATF standards and norms.
If South Africa did not sign the FICA Bill, it would have sent the wrong message to the global financial system, that we are not serious in combating all forms of financial crimes. This would have created problems in conducting business globally, not only for the local banking sector, but also other financial institutions.
The FICA Bill outlined its alignment to International norms and standards by broadening its definition of money laundering to include juristic entities such as trusts and companies, which will make it harder for individuals to hide behind legal entities to evade tax. The FICA defines money laundering as follows:
“An activity which has or is likely to have the effect of concealing or disguising the nature, source, location, disposition or movement of the proceeds of unlawful activities or any interest which anyone has in such proceeds, and includes any activity which constitutes an offence in terms of section 64 of this Act or section 4, 5 or 6 of the Prevention Act”.
The Bill further inserts the new definition of ‘beneficial owner’, and defines a legal person as one that conducts a single transaction, thus allowing companies and trusts to be included in the definitions of entities that would be subject to this Bill, as they would be effectively conducting such transactions.
The Bill has also enhanced the customer due diligence requirements for accountable institutions. Sections 21A, 21B and 21C of the Bill highlights that accountable institutions should ensure that they fully understand their consumers’ business. As a result of the aforementioned, the consumer will, in turn, be required to keep records, identify the beneficial owner, and much like the accountable institution, thoroughly understand the beneficial owner’s business. The Bill further introduces requirements of the consumer having to provide on-going due diligence regarding well known public or private sector positions.
The Bill’s implementation of the United Nations Security Council Resolutions relating to the Freezing of Assets has been an added enforceability mechanism. The Bill now allows accountable institutions, in accordance with the United Nations Security Council Resolution, to freeze assets that may be financially sanctioned.
Though the delay in the signing of this Bill may have been a contentious one, South Africa is now in line with FATF standards and norms which provides the security for both local and foreign businesses that any financial transactions will be secured and not easily exposed to financial crimes. It, once again, shows South Africa’s commitment to the combatting of financial crime and protecting the integrity of our financial system and our tax base.