Mapula Sedutla – Editor

A number of sections of the Financial Intelligence Centre Amendment Act 1 of 2017 (the Amendment Act) were gazetted recently. The Amendment Act was signed into law by President Jacob Zuma on 26 April and gazetted on 2 May (GN396 GG40821/2-5-2017), but the determination of the commencement date was left to the Minister of Finance.

According to the Financial Intelligence Centre (FIC), the key objective of the Amendment Act is to improve the protection of the integrity of South Africa’s financial system and strengthen its ability to prevent and punish financial crimes such as money laundering, illicit capital flows, tax evasion, corruption, bribery and financing of terrorism.

The Amendment Act also introduces the following new concepts and approaches to the implementation of the Financial Intelligence Centre Act 38 of 2001 (FIC Act):

• Full range of customer due diligence requirements, which are focused on understanding customers better rather than simply identifying and verifying their identities.
• Customer-friendly approach based on a risk-based customer due diligence, which enables efficient utilisation of resources and should make compliance easier for low risk clients.
• Beneficial ownership, which requires institutions to know and understand the natural persons who ultimately own or exercise control over legal entities or structures.
• Prominent (influential) persons and ‘politically exposed persons’, which requires institutions to better manage risks relating to relationships with prominent persons.
• 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 various provisions of the Amendment Act will start on different dates, namely, 13 June, 2 October and dates to be determined after 2 October – but expected to be no later than the end of 2018.

The first set of implemented 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. 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.

The FIC stated that the commencement and operationalisation dates of the two remaining set of provisions in the Amendment Act, namely ss 26A to 26C dealing with the freezing of assets in terms of the United Nations Security Council Resolutions on targeted financial sanctions, and sch 3A dealing with the setting of a monetary value threshold for companies doing business with the state, will be determined after October. One of the new features that will be introduced by the Amendment Act is a requirement for institutions to determine whether there are specific money laundering or terrorist financing risks associated with relationships with prominent persons in companies doing business of a certain value with the State. This provision, which relates to sch 3A, will commence on 2 October, but will require operationalising later by notice, once a monetary value threshold has been finalised and the state is able to generate such a database or capability.

Those who wish to comment on the Amendment Act are requested to make submissions by 12 July electronically by using the online response at www.fic.gov.za.

This article was first published in De Rebus in 2017 (July) DR 3.