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Time to consult

17 April 2004 Angelo Coppola

"Our current interpretation of the Financial Intelligence Centre Act (FICA) does not regard the payment of each and every contractual premium provided for in the policy contract as a separate transaction." Gerhard Joubert, executive director of the LOA.

It is therefore unnecessary to identify, before 1 July 2004, all existing clients who are paying premiums.

The LOA will make representations to the Minister of Finance, through the Money Laundering Advisory Council, to adopt an approach in respect of existing clients of the insurance industry similar to the one in the UK and the one foreseen in the revised Financial Action Task Force (FATF) 40 Recommendations.

Benefit payments to clients, ad hoc premium increases and amendments to policy contracts may however be considered to be transactions.

These transactions may only be entered into after the existing client has been identified in accordance with the provisions of FICA and the regulations.

The current exemptions may however also apply and must be kept in mind.

The FATF 40 Recommendations, issued in June 2003, provide for the identification of clients to take place after the business relationship has been entered into, but before or at the time of any payout or exercise of a vested right under the relationship.

Note:

The FATF is a body established by the G8 countries in the late 1980's to set international standards for anti-money laundering measures.

These standards were formulated in the form of 40 recommendations and deals with the requirements that countries must meet.

These requirements deal with governments, legislation, financial institutions and other institutions at risk of being used for money laundering purposes.

These standards are commonly referred to as the FATF 40 Recommendations.

The FATF standards formed the basis of South African anti-money laundering legislation and compliance with the standards gave rise to the legislation.

South Africa was granted membership of the FATF in June 2003 following a country evaluation in April 2003 to determine the country's level of compliance with the FATF standards as embodied in the 40 Recommendations.

In July 2003 the FSA in the UK granted insurers exemptions from the duty to identify existing clients based on a cost-benefit analysis that estimated the once-off cost of the identification effort to be in excess of 170m pound sterling.

“We have no reason to believe that the cost of such an exercise in South Africa would be any less expensive or any more effective than elsewhere in the world,” concludes Joubert.

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