Law firms guide to managing DPIPs

May 3rd, 2022
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The Financial Intelligence Centre Amendment Act 1 of 2017 (FICAA) was introduced in an effort to align and combat money laundering globally. One of the key enhanced concepts expanded on are Prominent Influential Persons (PIPs) and Politically Exposed Persons (PEPs) now being expanded to include Domestic Prominent Influential Persons (DPIPs) and Foreign Prominent Public Officials (FPPOs).

While the concept of a PEP still very much exists, the FICAA expanded on this concept to recognise that there is a broader range of politically or publicly exposed persons that should be identified as a source of potential risk.

To address this, the concepts of a DPIP and a FPPO were created and it was stipulated that not only should people that fulfil the roles published in sch 3A and 3B of the Financial Intelligence Centre Act 38 of 2001 (FICA) be subject to enhanced due diligence checks, but their ‘immediate family members’ or ‘known close associates’ should be treated as if they were DPIPs and FPPOs themselves.

Identifying a DPIP

DPIPs are defined as individuals who are or who have been entrusted by South Africa with a prominent or public role or function. This covers a wide range of positions such as government ministers, leaders of state-owned enterprises and members of the judiciary. It also includes individuals and companies in the private sector who do business with the government. A full list of individuals classified as DPIPs can be found in sch 3A of the FICAA.

Working with DPIPs

According to s 21G of the FICAA (see Financial Intelligence Centre ‘Anti-Money Laundering and Counter-Terrorism Financing Legislation, 2018’ (www.fic.gov.za, accessed 3-5-2022)), accountable institutions need to undertake enhanced due diligence where a client is identified as a DPIP.

The Financial Action Task Force (FATF) has highlighted that, due to their positions, individuals in prominent public functions are potentially more likely to commit money laundering offences and related predicate offences, including corruption and bribery. However, just because a person is in a prominent public position does not mean that you should avoid doing business with them. Instead you should create and document a process on how to identify these individuals, as well as, once identified there should be further steps in place to screen these individuals’ source of funds and wealth, conduct enhanced ongoing monitoring of the business relationship and obtain senior management approval for establishing the business relationship. It is important to note that these same processes are also to be taken into account when dealing with immediate family members and known close associates of DPIPs and FPPOs.

Identifying DPIPs proves to be a tricky and often time consuming task as there is no official list or freely available database of South African DPIPs. To add to this complexity, the names of people who hold these roles change on a regular basis as companies and government departments change. As a result, often accountable institutions have to resort to a timely and risky approach of relying on the internet or a client’s disclosure when asked if they are a prominent or influential person or related to these persons.

As a South African first, to address this, DocFox have enhanced our screening database to now include the core roles identified in sch 3A of the FICAA which, to name a few, include:

  • The President or Deputy President.
  • A government minister or deputy minister.
  • The Premier of a province.
  • A member of the Executive Council of a province.
  • An executive mayor of a municipality.
  • A leader of a political party.
  • A member of a royal family or senior traditional leader.
  • A constitutional court judge or any other judge.
  • The head, accounting officer or chief financial officer of a national or provincial department or government component.
  • The municipal manager of a municipality.
  • State-owned enterprises: The chairperson of the controlling body, the chief executive officer, or a natural person who is the accounting authority, the chief financial officer or the chief investment officer of a public entity.
  • The chairperson of the controlling body, the chief executive officer, the chief financial officer or the chief investment officer of a municipal entity.
  • An ambassador or high commissioner or other senior representative of a foreign government based in South Africa.
  • An officer of the South African National Defence Force above the rank of major-general.

What this means is that, when using our enhanced database, accountable institutions no longer have to rely on potentially unreliable client disclosures, outdated data sources or waste time manually researching each individual client. Our enhanced database is built into our comprehensive watchlist screening solution and you will automatically get notified if any person or entity loaded onto DocFox is a domestic prominent or influential person. In addition to this, we have also added the World Bank Debarred list (see The World Bank ‘Procurement – World Bank listing of ineligible firms and individuals’ (www.worldbank.org, accessed 3-5-2022)) to our DocFox screening process for an added layer of due diligence.

This enhanced database coupled with our adverse media screening (see DocFox ‘Why you should spend more time on adverse media’ (https://blog.docfox.co.za/, accessed 3-5-2022) will give you peace of mind knowing that your clients are continuously screened using the most comprehensive anti-money laundering software. In short, our comprehensive screening solution will automatically provide global coverage for identifying DPIPs, FPPOs, sanctioned individuals and organisations, in real time.

Reporting suspicious activity

As always a risk-based assessment should be carried out on individuals and when a DPIP is identified it indicates that enhanced due diligence should be carried out. A DPIP is simply an indicator of potentially higher risk and you should take the time to perform due diligence checks, especially around the source of funds and source of wealth to determine where they originated from, all which can be collected and analysed through the DocFox system.

It is recommended that you remain risk conscious and that you always report any instances of proven or suspected  activity or transactions relating to money laundering and terrorist financing. This is mandated in terms of the FICA and ‘requires a person who carries on a business, or is in charge of or manages a business, or who is employed by a business, and who has a suspicion of Money Laundering or Terror Financing activity or unusual transaction, to report this to the Financial Intelligence Centre.’

Being fully FICA compliant does not need to be complicated or time consuming particularly with the right tools and processes in place. Identifying whether your client is a DPIP is a very important part of your FICA compliance process and will assist in safeguarding your business’s reputation and afford you the ability to make informed decisions and attain the requisite knowledge of these individuals prior to onboarding these potential clients. Request a demo to see how DocFox can help your team make informed decisions in a fraction of the time, prevent your business from being used to launder money and ultimately meet your FICA requirements.

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