THE FINANCIAL INTELLIGENCE CENTRE ACT
These notes are for discussion purposes only and do not purport to contain a complete summary of the Financial Intelligence Centre Act and regulations. For more detailed queries, please consult your legal adviser.
WHAT IS THE FINANCIAL INTELLIGENCE CENTRE?
The Financial Intelligence Centre ("the Centre") is a government body based in Pretoria, whose objective it is to assist in the identification of the proceeds of unlawful activities and to make this information available to investigating authorities, the intelligence services, SARS and similar bodies in other countries.
It is headed by a Director, who is appointed for a five year term by the Minister of Finance and is overseen by the Money Laundering Advisory Council, which consists of numerous representatives from the government and affected members of the private sector.
WHO IS AFFECTED BY THE ACT?
There are 19 categories of accountable institutions ("institutions") listed in the Act, including estate agents, attorneys and banks.
WHAT STEPS MUST BE TAKEN TO IDENTIFY CLIENTS?
An "institution" may not establish a business relationship or conclude a single transaction with a client unless it has taken the prescribed steps to establish and verify the identity and/or authority of the client or the client's agent or a person on whose behalf a client is acting (hereinafter referred to as a "client's client").
In the case of an existing business relationship, the institution may not conclude a transaction with the client until it has taken all of the above steps and also traced all accounts at the institution that are involved in transactions concluded in the course of that business relationship.
There are various requirements set out in the regulations for the identification of clients and the verification of their identity (see Annexure "A"). The Estate Agency Affairs Board will shortly be issuing best practice guidelines, which will further clarify these requirements.
WHAT ARE THE RECORD-KEEPING REQUIREMENTS?
For the purpose of concluding both a single transaction and a business relationship with a client, the institution must keep records of:
1. The identity of the client / client's agent / client's client;
2. The manner in which the identity was established;
3. The nature of the business relationship or transaction;
4. The parties to the transaction and the amount involved;
5. All accounts involved;
6. The name of the person who obtained the information on behalf of the institution;
7. Copies of documents obtained by the institution to verify the person's identity.
Records may be kept in electronic form and must be kept for 5 years from the date of a single transaction or the date on which the business relationship is concluded.
WHO HAS ACCESS TO THESE RECORDS?
The Centre can obtain a warrant from a magistrate or judge who has jurisdiction, to gain access during ordinary working hours to any institution and can examine, make extracts from or copies of any such records. A warrant will be issued if there are reasonable grounds to believe that the records may assist the Centre in identifying the proceeds of unlawful activities or combating money laundering activities. Warrants can be conditional.
WHAT TYPE OF SUSPICIOUS AND UNUSUAL TRANSACTIONS MUST BE REPORTED TO THE CENTRE?
The institution (including owners, managers and employees) must report suspicious and unusual transactions if it suspects that:
1. It has received or is about to receive the proceeds of unlawful activities;
2. A transaction facilitated or is likely to facilitate the proceeds of unlawful activities;
3. A transaction has no apparent business or lawful purpose;
4. A transaction is concluded for the purpose of avoiding giving rise to a reporting duty under the Act;
5. A transaction is relevant to the investigation of an evasion or attempted evasion to pay any tax, duty or levy.
A person ought reasonably to have known or suspected a fact if the conclusions that he or she ought to have reached are those which would have been reached by a reasonably diligent and vigilant person having both:
1. The general knowledge, skill, training and experience that may reasonably be expected of a person in his or her position;
2. The general knowledge, skill, training and experience that he or she in fact has.
WHAT OTHER TYPES OF TRANSACTIONS MUST BE REPORTED TO THE CENTRE?
1. The institution must report a cash transaction in excess of a certain prescribed amount (still to be set) to the Centre if such amount is paid to the institution by a client / client's agent/ client's client or paid by the institution to a client / client's agent / client's client.
2. The conveyance of cash to or from RSA in excess of a prescribed amount (still to be set) (in this case, the report is not made to the Centre, but to a person authorised by the Minister of Finance for that purpose, who must then without delay send a copy of the report to the Centre);
3. The conveyance of money by electronic transfer to or from RSA in excess of a prescribed amount (still to be set) (the report must be made directly to the Centre).
MAY A CLIENT BE TOLD ABOUT A REPORT?
A person who makes a report or who knows that a report has been made or is to be made may not disclose that fact or any contents of the report to any person, including the person about whom the report is made, other than:
1. Within the scope of the powers and duties of that person in terms of any legislation;
2. For the purpose of carrying out the provisions of the Act;
3. For the purpose of legal proceedings, including proceedings before a judge in chambers;
4. In terms of an Order of Court.
CAN A TRANSACTION CONTINUE ONCE A REPORT IS MADE?
The institution may carry on with the transaction unless the Centre directs it not to do so. However, the Centre may direct the institution not to proceed with a transaction for a period not exceeding 5 working days to allow the Centre to:
1. Make the necessary enquiries regarding the transaction;
2. If the Centre deems it appropriate, to inform and advise an investigating authority or the National Director of Public Prosecutions.
WHAT IS A MONITORING ORDER?
A judge designated by the Minister of Justice for the purpose of the Interception and Monitoring Prohibition Act may, on written application by the Centre, order an institution to report to the Centre in such confidential manner as may be specified in the order, all transactions concluded by a specified person with the institution or all transactions conducted in respect of a specified account or facility at the institution on grounds that:
1. The person has transferred or may transfer the proceeds of unlawful activities to the institution;
2. The person is using the institution for any money laundering or suspicious transactions;
3. An account or facility has been used for the above.
The Monitoring Order will lapse after 3 months unless extended by the Judge for further periods not exceeding 3 months each.
An application for a Monitoring Order must be heard and an Order issued without notice to or hearing the persons involved in the suspected money-laundering activities.
WHAT PROTECTION IS THERE FOR PERSONS MAKING REPORTS?
Persons making reports and acting in good faith are:
1. Not subject to criminal or civil action;
2. Competent but not compellable witnesses in criminal proceedings;
3. Entitled not to have any evidence of their identity heard at criminal proceedings unless they testify at those proceedings.
WHAT SYSTEMS ARE REQUIRED TO ENSURE COMPLIANCE WITH THE ACT?
An institution must formulate and implement Internal Rules concerning:
1. The establishment and verification of the identity of persons;
2. The keeping of records;
3. The manner in which and place at which such records must be kept;
4. The steps to be taken to determine when a transaction is reportable to ensure the institution complies with its duties under the Act.
The institution must make a copy of its Rules available to each employee involved in relevant transactions, the Centre and any supervisory body which performs regulatory or supervisory functions in respect of that institution.
The institution must provide training to its employees to enable them to comply with the provisions of the Act and the internal rules applicable to them.
The institution must appoint a compliance officer to ensure:
1. Compliance by the institution with its obligations under the Act;
2. Compliance by employees with the Act and the Internal Rules.
WHAT ARE THE PENALTIES FOR NON-COMPLIANCE?
The Act lists numerous acts of non-compliance which constitute offences.
Persons convicted of failing to report the conveyance of cash into or outside RSA or failing to implement Internal Rules or appoint a compliance officer are liable to imprisonment for a period not exceeding 5 years or a fine not exceeding R1-million.
Persons convicted of any other offence in terms of the Act are liable to imprisonment for a period not exceeding 15 years or a fine not exceeding R10-million.
WHICH EXEMPTIONS ARE APPLICABLE TO ESTATE AGENTS?
Estate agents are exempted from compliance with certain provisions of the Act in the following limited circumstances:
1. All institutions are exempt from the duty to identify clients and maintain records of the client's identity in respect of a business relationship or transaction concluded with that institution (the second accountable institution) by another institution (the primary accountable institution) acting on behalf of a client of that primary institution if the primary institution confirms in writing to the secondary institution that:
1.1. It has established and verified the identity of the client;
1.2. In terms of its Internal Rules, it will have established and verified the identity of every client in accordance with the Act.
2. All institutions are exempt from verifying the identity of a client if:
2.1. The client is situated in a country where, to the satisfaction of the relevant supervisory body, there is equivalent anti money-laundering legislation and supervision to that which applies to the institution;
2.2. A person or institution in that country, which is subject to the anti money laundering regulations, confirms in writing to the institution that it has verified the identity details of the client which the local institution has already obtained in terms of the Act;
2.3. The foreign person or institution undertakes to forward all documents obtained in the course of verifying such particulars to the accountable institution.
3. Estate agents are exempt from the duty to identify and the duty to maintain records and to formulate and implement internal rules and to appoint a compliance officer in respect of services rendered in terms of paragraphs 2(a) and (b) of the Estate Agency Affairs Act 1976, which read as follows:
(a) Collecting or receiving money payable by any person to or on behalf of a developer or a body corporate in terms of the Sectional Titles Act, in respect of a unit or proposed unit;
(b) Collecting or receiving money on behalf of a share block company payable by the holder of a share in such company or his nominee.
Verification of Identity for SA citizens and residents and Foreign Nationals:
The institution must obtain from a natural person for a single transaction or establishing a business relationship:
1. Full names;
2. Date of birth,
3. Identity number or, for foreign nationals, nationality and passport number;
4. Income tax reference number (exempt until further notice);
5. Residential address.
The above must be verified by comparing the information furnished to:
1. An identity document (or, if the client is reasonably not able to produce an identity document, then a document which contains a photograph, full names or initials and surname, date of birth and identity number).
2. A copy of a document issued by SARS bearing the income tax reference number and name of the person (exempt until further notice);
3. For the residential address, information which can "reasonably be expected to achieve such verification".
Verification of Identity for Legal Persons:
The institution must obtain from the natural person who acts on behalf of a close corporation (CC) or company for a single transaction or establishing a business relationship:
1. The registered name, registration number and registered address of the CC/company.
1.1. In the case of a company, this information is to be verified by viewing a copy of the most recent versions of the Certificate of Incorporation (CM1) and Notice of Registered Office and Postal address (CM22), bearing the stamp of the Registrar of Companies and signed by the Company Secretary.
1.2. In the case of a close corporation, this information is to be verified by viewing a copy of the Founding Statement and Certificate of Incorporation (CK1) and Amended Founding Statement (CK2), if applicable, bearing the stamp of the Registrar of Close Corporations and signed by an authorised member or employee of the close corporation.
3. The name under which the CC/company conducts business;
4. The address from which the CC/company operates or, if it operates from multiple addresses:
4.1. The address of the office seeking to establish a relationship or transact with the institution and;
4.2. The address of its head office.
5. In the case of a company:
5.1. The full names, date of birth and identity number/passport number and nationality of the manager of the company and each person who purports to be authorised to deal with the institution on behalf of the company (to be verified as for natural persons above);
5.2. The full details as above or full legal persona details of any natural or legal person, partnership or Trust holding 25% or more of the voting rights at a general meeting of the company concerned (to be verified in accordance with the verification rules for that particular entity).
6. In the case of a CC, the full names, date of birth and identity number/ passport number and nationality of each member of the CC and each person who purports to be authorised to deal with the institution on behalf of the CC;
7. The income tax and/or VAT registration numbers of the CC/company, if applicable. These are to be verified by reference to a SARS document bearing the name of the entity and the relevant tax number/s (exempt until further notice);
8. The residential address and contact details of:
8.1. The manager of the company or each member of the CC;
8.2. Each person who purports to be authorised to deal with the institution on behalf of the CC/company;
8.3. Each natural or legal person, partnership or Trust holding 25% or more of the voting rights at a general meeting of a company.
All to be verified as above.
For foreign companies, the institution must obtain the following information from the natural person acting on behalf of the foreign company:
1. The name and number under which it is incorporated and the address where it is situated for the purpose of incorporation. This is to be verified by viewing an official document issued by an authority for recording incorporation in the relevant country;
2. The name under which it conducts business in its country of incorporation and the name under which it conducts business in RSA;
3. The address from which it operates in the country where it is incorporated or, if it operates from multiple addresses, the address of its head office.
4. The address from which it operates in South Africa or, if it operates from multiple addresses, the address of the office dealing with the institution.
5. The income tax/VAT registration numbers, if applicable (to be verified against a SARS document, as above) (exempt until further notice).
6. The full names, date of birth, identity number and country of nationality, as applicable, of the manager of the company in respect of its affairs in RSA and of each person who purports to be authorised to deal with the institution on behalf of the company (to be verified as for natural persons above).
7. The full details as above or legal persona details of any natural or legal person, partnership or Trust holding 25% or more of the voting rights in the foreign company (to be verified as for that particular entity);
8. The residential address and contact details of:
8.1. The manager of the company in respect of its affairs in RSA;
8.2. Each person who purports to be authorised to deal with the institution on behalf of the company;
8.3. Each natural or legal person, partnership or Trust holding 25% or more of the voting rights at a general meeting of the company.
To be verified as above.
Verification of Identity for other Legal Persons:
The institution must obtain from the person authorised to act on behalf of the legal person for a single transaction or business relationship:
1. The name of the legal person, its legal form and the address from which it operates (to be verified by viewing the constitution or other founding document in terms of which the legal person was created);
2. The income tax registration number, if applicable (to be verified against a SARS document, as above) (exempt until further notice);
3. The full names, date of birth and identity number, name of country (if applicable), residential address and contact details of each natural person who deals with the institution (to be verified as for natural persons).
Verification of Identity for Partnerships (Other than partnerships formed by professional persons and designated by notice in Section 30 of the Companies Act):
The institution must obtain from the natural person purporting to act on behalf of the partnership for a single transaction or business relationship:
1. The name of the partnership (to be verified by viewing the partnership agreement);
2. The full names, date of birth and identity number/passport number and nationality or company details or foreign company details or legal persona details or Trust details of:
2.1. Every partner (including every member of a partnership en commandite, an anonymous partnership or any similar partnership);
2.2. The person who exercises executive control over the partnership;
2.3. Each natural person who deals with the institution on behalf of the partnership.
The above to be verified according to the verification requirements for each entity.
Verification of Identity for Trusts:
The institution must obtain from the person purporting to act on behalf of the Trust:
1. The identifying name and number of the Trust (to be verified by viewing the Trust instrument and Letters of Authority issued by the Master of the High Court or such like official document from the country where the Trust is registered);
2. The address of the Master's Office where the Trust is registered (to be verified by reference to the Letters of Authority);
3. The income tax registration number of the Trust, if applicable (to be verified by reference to a SARS document, as above) (exempt until further notice);
4. The full names, date of birth and identity number/passport number and nationality and residential address and contact details or full company details or legal persona details or partnership details of:
4.1. Each Trustee of the Trust;
4.2. Each person who purports to be authorised to deal with the institution on behalf of the Trust;
4.3. Each beneficiary of the Trust;
4.4. The Founder of the Trust.
To be verified according to the requirements for each particular entity.
5. Particulars of how the beneficiaries of the Trust are determined.
Where the natural or legal person, partnership or Trust which was the Founder of the Trust has died or no longer exists, the institution must verify the particulars of that Founder by comparing those particulars with information which can reasonably be expected to achieve such verification and is obtained by reasonably practical means, taking into account any guidance notes concerning the verification of identities which apply to that institution.
Verification of Identity for Agents:
When a natural person seeks to transact or establish a business relationship on behalf of another natural person, legal person or Trust, the institution must in addition to the particulars referred to in the above regulations obtain from that person proof of that person's authority to act on behalf of that other natural person, legal person or Trust.