Financial services providers (FSPs) registered under the Financial Advisory and Intermediary Services Act 2002 fall within the ambit of ‘accountable institutions’ under the Financial Intelligence Centre Act 2001. As accountable institutions, these FSPs are obliged to comply with the FIC Act and are subject to oversight by the FSCA.
The FSCA has recently investigated compliance with provisions of the FIC Act across various FSPs and imposed penalties on them. Those sections of the FIC Act to which specific focus has been given are set out below, together with key takeaways.
- Section 24(3) contemplates the appointment, by an accountable institution, of a third party to perform the record-keeping duties imposed on it by section 22 and 22A. Accountable institutions relying on third parties for record keeping must provide the Financial Intelligence Centre (FIC) and the FSCA with the prescribed particulars regarding the third party.
- Section 42(1), read with guidance note 7 issued by the FIC provides that an accountable institution must develop, maintain and implement a program for anti-money laundering and counter-terrorist financing risk management and compliance (RMCP). Accountable institutions must ensure that a RMCP is in place, and that it covers all those aspects provided for in section 42(2). Having a RMCP is not enough though; the accountable institution must be able to evidence the implementation of the RMCP in its day to day operations.
- Section 43 requires that an accountable institution must provide ongoing training to its employees to enable them to comply with the FIC Act and the RMCP. Regular training must be provided to employees, and accountable institutions must ensure that adequate training records are maintained.
- Section 28(b) provides that an accountable institution must, within the prescribed period, report the particulars of cash transactions exceeding R24 999.99, to the FIC. Cash threshold reports must be filed with the FIC by making use of the internet-based reporting portal provided at http://www.fic.gov.za. Queries regarding reporting of cash threshold transactions can be lodged on the FIC website (fic.gov.za) or raised with the FIC call centre (012 641 6000).
In July 2020 the FSCA published details of penalties for 8 FSPs for contravening the above provisions. Sanctions for non-compliance included:
- a reprimand for failure to comply with section 24(3);
- financial penalties of between R5 000 and R10 000 for failure to comply with sections 42 and 43; and
- financial penalties of up to R400 000 for failure to comply with section 28(b) – this amount will however vary based on the volume of unreported transactions.
Accountable institutions generally, and FSPs specifically, are advised to carefully consider their compliance with the FIC Act.