As part of the government-led Interdepartmental Committee on Combating Money Laundering, Terrorist Financing and Proliferation Financing, the Financial Intelligence Center (FIC) plays a crucial role in supporting SA’s efforts to get off the Financial Action Task Force (FATF) gray list.


Global watchdog SA was graylisted last year over his company’s results Mutual Evaluation Report 2021. This report found that there was a lack of understanding among the country’s responsible institutions, especially the Designated Non-Financial Businesses and Professions (DNFBPs), about their money laundering and terrorist financing risks.


The country is required to take specific steps according to the agreed gray list action plan to address the deficiencies identified in this report. South Africa is expected to resolve all deficiencies and achieve full compliance by February 2025, with the country submitting comprehensive follow-up reports to the FATF in the period to then.


SA has made progress in addressing the FATF recommended action items. These measures are intended to strengthen the country’s efforts to combat money laundering, terrorist financing and proliferation financing.


Schedule updates


One of eight strategic actions that SA committed to resolve by January 2025 was the requirement to improve risk-based oversight of DNFBPs.


To effectively apply risk-based supervision, certain types of companies had to be designated as responsible institutions within the meaning of Schedule 1 to the FIC Act.


The amendment to the Annexes to the FIC Law, which came into force in December 2022, included broadening the scope of the FIC’s work regarding the supervision of the DNFBP sector and also integrated more sectors as responsible institutions.


These sectors include high-value commodity traders (such as precious metals and stones and motor vehicle traders), crypto asset service providers, corporate service providers (including accountants who provide this service), lenders, cooperative banks and lawyers practicing with confidence . accounts.


Other legal practitioners, real estate agents and trust service providers were already listed as responsible institutions.


All responsible institutions listed in Schedule 1 of the FIC Act must register with the FIC through the registration and reporting platform called goAML. The FIC has issued public compliance communication 5D and a goAML User Guide to assist responsible institutions with registration.


Risk assessments


Guidelines 6 and 7, issued by the FIC, require certain responsible institutions to provide information on their understanding of their FIC Act obligations, as well as their money laundering, terrorist financing and proliferation financing risks:



Therefore, once such responsible institutions are registered with the FIC, they must complete the Risk and Compliance Questionnaire (RCR) on the FIC website without delay. A responsible institution must file a separate RCR for each Schedule item under which it is registered with the FIC.


If a responsible institution has not completed the 2023 RCR questionnaire, it should do so without delay as it is already in a state of non-compliance and may face sanctions. (The FIC has not yet launched a 2024 version of the RCR questionnaire and will communicate any updates on this in the future.)


The FIC continues to conduct risk assessments for various sectors, including crypto asset service providers, brokers, trust and corporate service providers and legal practitioners, to better understand their money laundering, terrorist financing and proliferation financing risks .


An updated one national terrorist financing risk assessment, which discusses the level of risk for terrorist financing in South Africa, was released in June 2024. Moreover, the risk assessment risks and vulnerabilities in the field of terrorist financing in the NPO sector was published in April 2024.


Changes to the FIC Act


The FIC law was amended following the adoption of the Amendment Act to the General Laws (Against Money Laundering and the Financing of Terrorism) in December 2022, and the Amendment Act to the Protection of Constitutional Democracy against Terrorism and Related Activities in January 2023.


These amendments addressed aspects of Targeted Financial Sanctions (TFS), Beneficial Ownership and Politically Exposed Persons (PEPs). Responsible institutions should familiarize themselves with these changes and comply with their FIC Act obligations in this regard.


The FIC website contains a TFS list of designated persons and entities as identified by UN Security Council resolutions. Responsible institutions are required to screen customer information against this TFS list without delay as UN Security Council resolutions now have immediate effect in South Africa (see FICs public compliance communication (PCC) 44A).


The definition of beneficial owner in terms of the FIC Act has been amended to expand the requirements in relation to any natural person (human), who is a beneficial owner of the client, i.e. a legal entity (organisation), partnership or trust. . FICs PCC 59 provides practical guidance on beneficial ownership and the application of a 5% ownership interest threshold to determine beneficial ownership.


Moreover, the ‘once a PEP, always a PEP’ principle now applies. The lists of different categories of PEPs and prominent influential people are contained in Schedule 3A, 3B and 3C of the FIC Act.


Risk management and compliance program


Article 42 of the FIC Act imposes an obligation on responsible institutions to develop, document, maintain and implement a Risk Management and Compliance Program (RMCP). Responsible institutions should ensure that their RMCPs are updated in accordance with the requirements following the changes in the FIC Act. Responsible institutions are warned that failure to comply with these compliance obligations may result in fines.


Crypto asset service providers and the travel rule


Guideline 9recently issued by the FIC, requires crypto asset service providers engaged in the transfer of crypto assets for or on behalf of their customers to fulfill certain obligations.


This means that an originating crypto asset service provider must obtain, maintain, and submit certain information about the originators and beneficiaries when processing transfers of crypto assets to the beneficiary crypto asset service provider before or in conjunction with the transaction.


Responsible institutions requiring further information and guidance on their FIC Act obligations can refer to the FIC website for various guidelines and PCCs. Alternatively, they can call the FIC Compliance Contact Center on 012 641 6000 or log a compliance question online.


This article was sponsored by the Financial Intelligence Center.




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