Beware! You could be used by criminals to carry out their crimes!

You and your firm could unwittingly become involved in crime if a customer you are dealing with uses your business to launder money acquired through a criminal activity, like drug dealing, or if the intention is to use your financial processes to provide funding for terrorists.

There is a reason that Financial Services Providers (FSPs) have been classified as accountable institutions in terms of the Financial Intelligence Centre Act, Act No. 38 of 2001 as amended (The FIC Act).  In terms of the FIC Act FSPs have a legal obligation to submit reports to the Financial Intelligence Centre (the FIC) so that, together, we can limit the opportunities for criminals to succeed in their criminal activities.

Case Study 

The FIC became aware of a R50 million Ponzi scheme and referred the information to the relevant Supervisory Body and the Asset Forfeiture Unit (AFU). The Supervisory Body’s investigation revealed that the company concerned was conducting the business of a financial services provider without registering to do so. FIC analysis revealed that several accounts were being used by the scheme. Information collected by the FIC helped the AFU obtain preservation orders on these accounts. The recovered money was paid into the Criminal Asset Recovery Fund to compensate investors.

  Here are the legal obligations that apply to all FSPs that fall within the ambit of the FIC Act:

1.                    The duty to establish and verify the identity of your clients
2.                    The duty to keep records
3.                    Report to the FIC. These reports include:

o        Cash threshold reports - FSPs are required to report any cash transaction above R24 999.99 to the FIC (section 28 of the FIC Act). Cash includes coin and paper money, and travellers’ cheques.  This applies to both cash received by your firm and cash that you pay out to your client.  You must report aggregates of smaller amounts which total R24 999.99 when combined, where it appears to you that the transactions involving those smaller amounts are linked in a way that suggests that they should be considered fractions of one transaction.  You can allow for a period of up to 24 hours between the different payments.  There are also instances where more than one accountable institution and/or reporting institution will be required to report information relating to the same transaction in terms of section 28 of the FIC Act.  

o        Suspicious and unusual transaction reports - The FIC Act requires that any person, who carries on a business, is in charge of a business, manages a business, or is employed by a business, must report suspicious or unusual transactions to the FIC (Section 29). This reporting obligation applies to FSPs too. 

o        Terrorist property reports - Section 28A requires that accountable institutions file a report with the FIC if the accountable institution knows that it possesses or controls property linked to terrorism or to entities that are sanctioned in terms of the provisions of the Protection of Constitutional Democracy against Terrorism and Related Activities Act, 2004.  The knowledge about the origin and ownership of the property in question is based on fact and should be acquired with reference to an objective set of circumstances or facts (as opposed to a suspicion that is formed subjectively).  

4.                    Formulate and implement internal rules.
5.                    Train your employees on the FIC Act and your internal rules.
6.                    Appoint a person (compliance officer) - to ensure that your business complies with the relevant provisions of the FIC Act.
7.                    Registration with the FIC via the FIC’s website. 

o        The number of FSP’s registered with the FIC as at 31 March 2013 was 4532 and 5529 as at 31 March 2014.

Find out more on the FIC’s website - www.fic.gov.za – or call 0860 222 200 if you have a query.