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  • FICA Act Important Notes

FICA Act Important Notes

07 June 2017

Important Amendments to the FICA Act- Here’s What You Should Take Note Of

By Kezia Talbot, Legal Advisor, BDO Wealth Advisers

In April 2017, President Zuma signed the Financial Intelligence Centre Amendment Act No. 1 of 2017 into law. Whilst these changes are not as yet effective, it is essential to understand the proposed amendments to the Financial Intelligence Centre Act No. 38 of 2001.

The main objectives of the Amendment Act are to:

  • Provide for customer due diligence measures, including with respect to beneficial ownership and persons in prominent positions;
  • To provide for a risk based approach to client identification and verification;
  • To provide for the implementation of financial sanctions and to administer measures pursuant to resolutions adopted by the Security Council of the United Nations;
  • To clarify the application of the Act in relation to other laws;
  • To provide for the sharing of information by the Centre and supervisory bodies;
  • To provide for risk management and compliance programmes, governance and training relating to anti-money laundering and to counter terrorist financing.

The real question, however, is how the changes to the Act will affect you in your interactions with accountable institutions (a person or organisation that carries out business of any entity listed), and, if you are an accountable institution, what additional steps will you need to take in order to be compliant with the Act.

Most notable, is the increased focus on trusts and legal entities. Once effective, Accountable Institutions will not be allowed to establish a business relationship or conclude any transactions with anonymous clients or clients under a fictitious name. This relates particularly to trusts and legal entities, as Accountable Institutions will be required to undertake additional due diligence measures to determine the nature of the client’s business, the ownership and control structure of the client, and the identity of the beneficial owner/s, which, in the case of trusts, would extend to having to determine the identity of each beneficiary of the trust.

The amendments now also provide for ongoing due diligence, which will mean more frequent requests for FICA documentation from you, as a client, and will entail ongoing administration on the part of the Accountable Institution. This has been done to ensure that the information relating to the identification of a client remains current.

In line with the commencement of automatic exchange of information between countries relating to tax matters, which is due to commence towards the end of 2017, and the clamp down by SARS on undisclosed offshore assets, section 29 of the Act has been amended to provide for an additional reporting obligation on Accountable Institutions. This obligation will arise when the Accountable Institution suspects that a transaction or series of transactions to which the client is a party may be relevant to the investigation of an evasion or attempted evasion of a duty to pay any tax, duty or levy imposed by legislation administered by SARS.

Taking into account the fact that the type of information which is collected from a client is classified as “personal information” as defined in the Protection of Personal Information Act No. 4 of 2013, one of the proposed amendments to the Act is that the Financial Intelligence Centre will be required to take appropriate measures in respect of personal information in its possession or under its control, particularly to prevent the loss, damage, destruction and unauthorised access to such personal information.

Most importantly, Accountable Institutions will be required to develop, document, implement and maintain a Risk Management and Compliance Programme, particularly relating to anti-money laundering and counter-terrorist financing. This is to be an in-depth programme setting out procedures for administering all requirements of the Act. Strict compliance with this section is required, and a failure to do so, may result in administrative sanctions being imposed on the Accountable Institution.

The amendments have been welcomed by the majority of stakeholders, who see this as a positive message to the international community that South Africa is taking all necessary actions to combat money laundering and terrorist financing activities, and also to cement our intention to remain relevant and compliant with international standards.

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