September 18, 2017
September 18, 2017
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The Financial Intelligence Centre Amendment Act 1 of 2017 (the FICA Amendment Act), was published in Government Gazette 40821 of 2 May 2017. This serves to amend the 2001 FICA Act, which aims to combat financial crimes, such as tax evasion, money laundering and terrorist financing activities. The purpose of the Amendment Act is to ensure greater transparency and integrity within South Africa’s financial system.

The requirements of the Amendment Act are stringent, and in the event of conviction of an offense, the penalties can be severe. Therefore the Amendment Act’s impact on South African business is considerable, and is not to be taken lightly. It is thus crucial for businesses to understand how the Amendment Act affects them so that they may fulfil their responsibilities under the Amendment Act.

Who is affected by the Amendment Act?

“Accountable institutions” are identified by the Amendment Act, including banks, estate agents, attorneys, and businesses providing money remittance services, long-term insurance services and foreign exchange. Furthermore, the Act further affects all clients and consumers who enter into either a single transaction or a business relationship with any of these aforesaid accountable institutions.

The FICA Amendment Act will have a major impact on your business if it falls into any of the above categories.

Salient ways in which businesses will be affected by the FICA Amendment Act:

  1. Business owners, as well as “beneficial owners” – who own or control the business – will need to be identified to prevent misusing legal entities in order to commit crimes such as tax evasion;
  2. Improvement to the due diligence process pertaining to customers, in order to ensure that business owners have a full understanding of the nature and potential risks which their customers pose;
  3. Business owners will need to identify, understand and assess the terror financing and money laundering risks faced by their businesses in terms of the services and products which they offer to their clients. A risk-based approach to combating these activities entails that businesses that are less susceptible to such activities will be subject to lighter-touch regulation and those significantly susceptible to such activities will be subject to stronger oversight;
  4. Provision for the freezing of assets relating to clients or customers associated with terrorism will need to be made by businesses, as per the United Nations Security Council Resolutions;
  5. As per the Protection of Personal Information Act (POPI Act), every business is expected to be responsible with regards to the collecting, processing, storing and sharing of another entity’s personal information;
  6. Provision is made for inspection powers for regulatory compliance purposes in accordance with the Constitution – the Amendment Act therefore addresses previous constitutional concerns raised about warrantless searches;
  7. Enhanced administrative and enforcement mechanisms.

Therefore, it is advisable that accountable institutions, as well as clients and consumers entering into transactions or business relationships with such institutions, familiarise themselves with the FICA Amendment Act to ensure their compliance.

Prepared by:

Ashley Adriaans | Director | Dispute Resolution: Litigation & Arbitration

Nicholas Meyer | Candidate Attorney

This article is a general information sheet and should not be used or relied on as legal or other professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your legal adviser for specific and detailed advice. Errors and omissions excepted (E&OE)

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