FIC Act Compliance Quiz

Penalties for Non-Compliance

• Failure to keep records as per sections 22,23,24 of the FIC Act can result in an administrative sanction: R10 000 000 (Natural Person) or R50 000 000 (Legal Person).

Reporting Obligations

• Entities have a duty to report certain transactions to the FIC.
• The FIC uses this data to conduct financial intelligence analysis, and may share it with law enforcement agencies.
• Key details for making a good regulatory report include the subject, activity, detection date, location, method, and reason for reporting.

Reporting to the FIC

• Failing to report transactions as per section 29 can result in an administrative sanction: R10 000 000 (Natural Person) or R50 000 000 (Legal Person), or a criminal sanction of up to 15 years imprisonment and/or a R100 million fine.

Cash Threshold Reporting (CTRs)

• Entities are required to report all cash transactions over R49 999.99.
• Reporting also applies to aggregated amounts within 24 hours exceeding R24 999.99 for a single client.
• The reportable cash transaction threshold is proposed to be raised from R24 999 to R49 999.
• Reporting is conducted via the GoAML platform within 3 days of the transaction.
• Cash for CTRs includes: coin and paper money, and traveller's cheques.
• Failure to report cash transactions as per Section 51 can result in an administrative sanction: R10 000 000 (Natural Person) or R50 000 000 (Legal Person), or a criminal sanction of up to 15 years imprisonment and/or a R100 million fine.

Terrorist Property Reporting (TPRs)

• Accountable institutions (AIs) must report property associated with terrorist and related activities, if held or controlled by the institution.
• The reporting trigger is if the AI becomes aware that it holds a customer that is designated by the United Nations Security Council (UNSC).
• Reporting deadline is within five (5) days of establishing that the AI has property associated with such activities.
• The Centre may approve a report after the five-day deadline.
• Only UN Security Council Resolutions are legally recognized sanctions lists in South Africa.
• However, AIs may screen persons against other sanctions lists based on their risk appetite.

Penalties for non-compliance with TPRs

• Administrative Sanctions: Up to R10 000 000 for natural persons and up to R50 000 000 for legal persons.
• Criminal Sanctions: Imprisonment for a period not exceeding 15 years or a fine not exceeding R100 million.

Risk Management Compliance Program (RMCP)

• In terms of section 42 of the FIC Act, AIs must develop, document, maintain and implement an anti-money laundering and counter-terrorist financing risk management and compliance program.
• RMCP must be commensurate with the size and complexity of the AI and the nature of its business.
• The program documents the approach adopted by the AI in dealing with financial crime obligations under the FIC Act.
• AIs must screen for adverse news media and verify the information before adjusting their client's risk-rating.
• All employees must be screened based on their role and the potential risk their role exposes the AI to money laundering, terrorist financing, and proliferation financing.
• The Centre maintains an updated sanctions list on its website, which reflects identity particulars of persons and entities included in notices published by the Director.

Sanctions vs Targeted Financial Sanctions

• Sanctions are preventive measures against threats to peace and security, including terrorism and proliferation of weapons of mass destruction.
• Sanctions are directed at certain countries, individuals, or entities.
• Sanctions do not require a finding of criminal guilt or civil entities.
• The legal basis for sanctions is Chapter VII, Article 41, United Nations Charter.
• Targeted financial sanctions are a ‘financial embargo’ on designated individuals and entities.
• Targeted financial sanctions are captured under FATF Recommendation 6 (Terrorism) and FATF Recommendation 7 (Proliferation).
• They prohibit dealing with assets of designated individuals or entities, including those owned, controlled by them, or on their behalf.
• Targeted financial sanctions also prohibit making assets or financial services available to designated individuals or entities, or those owned or controlled by them, or acting on their behalf.
• Procedural and human rights protection applies to targeted financial sanctions.

Using Third Parties

• AIs must maintain a register of all third-party service providers.
• AIs must ensure that third-party data sources comply with the Protection of Personal Information Act (POPIA).
• AIs must ensure that third-party service providers are able to confirm that no breaches of POPIA have occurred.

Suspicious Transaction Report (SAR)

• SARs are submitted when a suspicion does not relate to a transaction between two or more persons.
• Inquiries about a transaction that has not been made yet can also be submitted.
• A SAR can be submitted in respect of a suspicious transaction that has been abandoned or not completed.

Terrorist Financing Activity Report (TFAR)

• A TFAR must be submitted when a suspicion relates to terrorist financing and does not involve a transaction between two or more parties.
• TFARs must also be submitted for transactions where enquiries have been made but not completed.

Electronic Funds Transfer Reporting (EFT)

• Section 31 of the FIC Act requires the reporting of all electronic fund transfers sending money exceeding a prescribed amount out of South Africa or receiving money exceeding a prescribed amount from outside South Africa, on behalf, or on the instruction of another person.
• Reports must be made via the GoAML platform.

Penalties for non-compliance with EFT Reporting

• Administrative Sanctions: Up to R10 000 000 for natural persons and up to R50 000 000 for legal persons.
• Criminal Sanctions: Imprisonment for a period not exceeding 15 years or a fine not exceeding R100 million.

International Fund Reports (IFTR)

• The commencement of section 31 of the FIC Act, which will allow for the reporting of IFTRs is pending and upcoming.
• IFTRs report cross-border transactions above R5000 and must be filed within 72 hours.
• The aim of IFTRs is to ensure that information relating to cross-border electronic funds transfers is reported to the Centre, enhancing the FIC's ability to analyze financial flows and detect possible suspicious or unusual activity.
• The limit of IFTR reporting is R10,000.

Training

• AIs must provide ongoing training to their employees to ensure compliance with the provisions of the FIC Act and the Risk Management and Compliance Program.
• The focus of training is to ensure that employees are aware of their duties to help the AI avoid being abused for the facilitation of funds linked to money laundering, counter-financing of terrorism activities, and proliferation financing.

Test your knowledge on the penalties and reporting obligations outlined in the FIC Act. This quiz covers key aspects of compliance, including the consequences of non-reporting and the thresholds for cash transaction reporting. Understand your responsibilities as an entity under the FIC regulations.