FICA still in focus

For many Financial Service Providers (FSP's), compliance has become synonymous with the FAIS Act and the importance of other legislation, in particular FICA, is to some extent being disregarded.

Recent site visits by representatives of the FSB to several independent financial advisory practices has highlighted the need to renew the focus in terms of the Financial Intelligence Centre Act, or FICA as it is more generally referred to.

FICA applies, inter alia, to any persons conducting "long term insurance business" including brokers (advisers) in the definition of "Accountable Institutions". As such, it is worthwhile revisiting some aspects of the Act that spell out what is required from FSP's on a continuous basis.

Verifying your clients
Section 21 of the Act determines that any accountable institution must, before establishing a business relationship, verify the identity of the client. If the client is acting on behalf of another, the FSP must verify the identity of the other party and the client's authority to act on behalf of that party. If another person is acting on behalf of the client, the FSP must verify the identity of the person acting and that party's authority to act on behalf of the client.

Record keeping
Section 22 of the Act requires of an FSP not only to perform the verifications but also to keep record of, inter alia, the name of the person within the FSP who verified the identity of the client and/or other party and also the manner in which the verification was established. Furthermore, the FSP is responsible to retain the documents used for verification purposes. These records, which may be held electronically, are to be kept for a minimum of 5 years.

Internal Rules
Section 42 of the act requires an FSP to formulate and implement internal rules regarding the requirements of verification and record keeping, the determination of when transactions fall foul of the Act and what the reporting requirements in terms of the Act are.

These internal rules need to be customised and positioned within each FSP's internal structure. It is the responsibility of each FSP to ensure that all staff members have access to and are familiar with the contents of these rules.

Training
Section 43 of the Act requires the FSP to ensure the training of all employees in terms of the Act and the applicable internal rules. Each FSP must also appoint a responsible person within that FSP to ensure adherence to the Act. Many FSP's have had a turnover in employees since the introduction of the Act and have neglected the training of new employees. It is recommended that records of training and training material used are kept as proof of compliance to Section 43.

Continuous focus
Only certain sections of the Act requiring continual focus are highlighted in this article. FSP's and their employees need to take be aware that non-compliance with FICA can lead to criminal prosecution and extensive fines. An annual review of the legislation and refresher training is essential.