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FICA

Anyone who has ever tried to open a bank account, get a loan, enable internet banking, and almost anything to do with a bank account has experienced the ‘FICA’ hassle: proof of residence, proof of salary, ID document, etc.

These requirements do not come from the banks; be grateful for the nuisance, and be patient with your bank. The ‘FICA’ system is one of Government’s measures to combat money laundering, and the use of illegally-acquired cash to finance terrorism and similar activities.

The Financial Intelligence Centre Act 2001 established exactly such a Centre. Its function is to gather, process, analyse and interpret information and to make the information available to the enforcement and revenue authorities both in the Republic and elsewhere.

To make the Centre’s function meaningful, strict compliance provisions have been legislated in the Act. Until some wide-ranging amendments in 2017, the Act criminalized failures to comply with its provisions. Now, in many instances, ‘administrative sanctions’ can be imposed – these can be a variety of restrictions and directives, as well as hefty fines: up to R10 million for a person, and R50 million for a corporate.

However, there is still a vast array of prohibitions which can result in criminal convictions.

A. Accountable institutions and client records

  1. Schedule 1 to the Act lists the ‘institutions’ with obligations of reporting information to the Centre. These include, amongst others:
    • attorneys;
    • banks;
    • forex dealers;
    • trust companies;
    • insurers;
    • money lenders;
    • estate agents;
    • gambling houses;
    • financial services providers.

  2. An accountable institution must (in very basic terms) keep a record of specified details of its clients and the transactions they conduct. These records must be kept for a period of 5 years – in the case of a client, after the relationship has terminated; and in the case of a transaction, after the particular transaction has been concluded. It is a crime to tamper with, or destroy those records.1

  3. Any authorized representative of the Centre can access those records during ordinary working hours if he has a warrant issued by a judge or magistrate. He may examine them, make extracts or copies. It is a criminal offence if the accountable institution fails, without delay, to give all reasonable assistance to that representative.2

B. Reporting duties

  1. The Centre can ask any accountable institution, or a ‘reporting institution’,3 or someone who is obliged to report on suspicious transactions (see below) to report to it on whether a specified person is or has been a client, or that person has represented any client, or any client has represented that person, and the nature of its business relationship with that person. It is an offence not to inform the Centre accordingly.4

  2. Accountable and reporting institutions must, not later than 2 days of becoming aware of the transaction, report to the Centre any transaction concluded with a client involving an amount of cash in the amount of R25 000.00 or more,5 and:
    • is paid by it to; or
    • is received by it from,

    the client, or from a person acting on behalf of the client, or from a person on whose behalf the client is acting.6

  3. Any owner, manager or employee of business who knows (or ought to have known, or even suspected) that the business has received, or is about to receive either:
    • the proceeds of unlawful activity; or
    • property connected to the financing of terrorist and related activities,

    commits a crime if he does not report all of this to the Centre within 15 days.7

  4. If such a person knows (or even suspects) that a transaction in which the business is involved relates to any of the following, he must similarly report it to the Centre and commits a crime if he does not do so:
    • facilitating the transfer of proceeds of unlawful activities;
    • facilitating the transfer of property connected to the financing of terrorist and related activities;
    • if the transaction has no apparent business or lawful purpose;
    • if it is to avoid any duty to report in terms of FICA;
    • the evasion of tax, duties and levies administered by SARS;
    • the financing of terrorist and related activities.8

  5. If such a person knows or suspects that the business has been or will be used, in any way, for money laundering, or for purposes relating to the financing of terrorist and related activities, he must similarly report this to the Centre – and commits a crime by not doing so.9

  6. The person who made (or must make) the report must not10 disclose that fact, or any information regarding the contents of any such report, to any other person and commits a criminal offence if he does.11

  7. It is forbidden, even, for any person who knows or suspects that a report has been (or is to be) made to disclose that knowledge or suspicion (or any information about the report) to any other person and it is a criminal offence to do so.12

  8. Anyone who intends taking or transferring R25 000.00 or more out of, or into, the Republic in cash (or cashable cheques, money orders, etc.) must report that to the Centre, and it is an offence not to do so.13

  9. If an accountable institution sends out of, or receives money from outside, the Republic by electronic transfer in an amount of R25 000.00 or more, it must report the transfer to the Centre, and commits a crime by failing in this obligation.14

  10. Any person who effects two or more transactions in order to avoid having to lodge any report under the Act commits an offence.15

C. Powers of the Centre

  1. The Centre, or an authorised investigating authority, may request any person who has made one of the aforementioned reports to furnish additional information. That person commits an offence if it fails to comply with the request.16

  2. If the Centre has reasonable grounds to suspect that a transaction (or a proposed transaction) may be contrary to the objects protected by the Act (terrorism financing, money laundering, tax evasion, etc.) it may direct the person not to proceed with the transaction in order to allow the Centre to make inquiries and even inform enforcement authorities. Obviously, it is an offence not to comply with such a directive.17

  3. A judge of the High Court may, if there are reasonable grounds to suspect conduct contrary to the objects of the Act, issue a monitoring order – in other words, that an accountable institution report to the Centre all transactions concluded with a specified person or in respect of a specified account. An institution that fails to comply with such an order commits an offence.18

  4. The Centre (or a supervisory body) may issue a directive, to anyone, to provide information, reports or statistical returns and anyone who fails to comply with such a directive commits a criminal offence.19

D. Resolutions of United Nations Security Council

International terrorism being one of the concerns that have driven many of the provisions in the Act, there is an obligation on our Minister of Finance to see to it that the Republic adopts resolutions by the Security Council of the UN requiring specified actions to be taken in respect of persons or entities identified in the particular resolution. The Minister notifies the adoption of the resolution by Notice in the Govt Gazette, and other appropriate means.

  1. It is a criminal offence to engage in any of the following conduct, or do any of the following acts, directly or indirectly, and whether in whole or in part, and by any means or method, knowing or even reasonably suspecting that it will be used for the benefit of, or on behalf of, or at the direction of or under the control of any such person or entity:
    • acquire, collect, use, possess or own property;
    • facilitate the acquisition, collection, use or provision of property;
    • provide or make available, or invite a person to provide or make available property;
    • provide or make available, or invite a person to provide or make available any financial or other service;
    • provide or make available, or invite a person to provide or make available economic support; and
    • facilitate the provision of any financial or other service, or the provision of economic support.20

  2. It is also a criminal offence to do anything (whether deal with, enter into a transaction, facilitate a transaction, whatever) in connection with movable or immovable property of whatever nature, and even rights, privileges, etc21 knowing or even suspecting that it will have the same kind of use: for the benefit of, or on behalf of, or at the direction of or under the control of any such person or entity specified in a resolution of the Security Council.22

  3. The offence includes the following in relation to such property:
    • making it possible for the person or entity identified in such resolution to retain or control the property;
    • converting the property;
    • concealing or disguising the nature, source, location, disposition or movement of the property;
    • concealing or disguising the ownership thereof or any interest anyone may have therein;
    • removing the property from a jurisdiction; or
    • transferring the property to a nominee.23

  4. If an accountable institution has in its possession or under its control any such property owned, controlled or directed by such an entity it must report that fact (and give certain information) within the period prescribed in the regulations. The accountable institution commits a criminal offence if it fails to do so.24

  5. Where an accountable institution has made such a report, the Director of the Centre can order the institution to report further in relation to such property, either at specified intervals, and/or if there is any change in relation to such property. It is a crime not to comply with such orders.25

  6. As soon as the Minister has published the notification of the adoption of a given resolution, or where the State President has published a similar such proclamation under the Terrorism Act (the Protection of Constitutional Democracy against Terrorist and Related Activities Act, 2004), all accountable institutions must scrutinize their information concerning clients with whom they have business relationships to determine whether any client is a person or entity identified in such Notice or Proclamation. It is an offence to fail to do this.26

E. Access to information

  1. Information held by the Centre is guarded, and access will be given only to certain entities under certain conditions. Any information obtained from the Centre is treated as confidential, and it is a criminal offence:
    • to use the information for a purpose other than that specified in the request for the information;
    • to disclose it except for legal proceedings, or if ordered by a Court, or with the permission of the Centre, or to carry out the provisions of any legislation; or
    • to use it except according to the arrangements and safeguards imposed by the Director of the Centre to maintain its confidentiability.27

  2. It is a crime to destroy or tamper with information kept by the Centre.28

  3. If any persons knows (or even ought to suspect) that information has been disclosed to the Centre, or that an investigation is being conducted as a result of information disclosed to the Centre, he commits a criminal offence if he alerts another person or gives him information likely to prejudice the investigation.29

  4. Any person who accesses (or persuades another person to access) any computer system (or application or data) of the Centre, or causes it to perform any function, without authority, commits a crime.30

  5. Any person who causes such computer to crash, or to be modified or impaired, is guilty of an offence.31

  6. Any person who causes any application or data or the computer system to be destroyed, erased or impaired is guilty of an offence.32

F. Inspections, appeals and inquiries

  1. An inspector appointed by the Director (or a supervisory body) may, at any reasonable time and on reasonable notice, enter and inspect any premises of an accountable institution, or a reporting institution. He may direct any person to appear for questioning and it is an offence to fail to appear for questioning.33

  2. An inspector may also order any person to produce documents and to furnish information in respect of the documents. It is a criminal offence to fail to comply with such an order, and also to give false information to an inspector.34

  3. It is also a crime to:
    • disobey any reasonable request by an inspector; or
    • obstruct an inspector in the performance of his duties.35

  4. It is an offence to obstruct, or threaten an official or representative of the Centre in the performance of his duties.36

  5. There is an appeal board constituted by members of the Financial Sector Tribunal which hears appeals against decisions for Centre or supervisory body regarding the imposition of administrative sanctions. Any person who interrupts its proceedings, or hinders or obstructs the board in the performance of its functions, committees a criminal offence.37

  6. It is an offence, if summoned to give evidence or produce anything at an appeal or an inquiry:
    • to fail to appear;
    • not to remain in attendance until excused;
    • to refuse to take an oath or affirmation;
    • to fail to produce anything as ordered;
    • not to answer questions fully; and
    • to give false evidence.38

  1. Section 48. ↩

  2. Section 49 read together with section 27A(5). ↩

  3. Which is someone who deals in Kruger Rands, or a motor vehicle dealer. ↩

  4. Section 50 read together with section 27. ↩

  5. Section 22(B) of the Money Laundering and Terrorist Financing Control Regulations, 2002 (as amended) – the ‘Money Laundering Regulations’. ↩

  6. Section 51 read together with section 28. ↩

  7. Section 52(1) read together with section 29. ↩

  8. Section 52(2) read together with section 29. ↩

  9. Section 52 read together with section 29(1)(c). ↩

  10. Except if required by statutory duties, the provisions of the Act, legal proceedings, or an order of court. ↩

  11. Section 53(1) read together with section 29(3). ↩

  12. Section 53(2) read together with section 29(4). ↩

  13. Section 54 read together with section 30(1). ↩

  14. Section 56 read together with section 31. ↩

  15. Section 64. ↩

  16. Section 57 read together with section 32(2). ↩

  17. Section 58 read together with section 34(1). ↩

  18. Section 59 read together with section 35. ↩

  19. Section 62A read together with section 45B. ↩

  20. Section 49A read with section 26B(1). ↩

  21. In other words, ‘property’ as defined in the Prevention of Organised Crime Act 1998. ↩

  22. Section 49A read with section 26B(2). ↩

  23. Section 49A read with section 26B(3). ↩

  24. Section 51A(1) read with section 28A. ↩

  25. Section 51A(2) read with section 28A(2). ↩

  26. Section 51A(3) read with section 28A(3). ↩

  27. Section 60(1) read together with section 40 and section 41. ↩

  28. Section 60(1)(b). ↩

  29. Section 60(2). ↩

  30. Section 65. ↩

  31. Section 65. ↩

  32. Section 66. ↩

  33. Section 62A read together with section 45B. ↩

  34. Section 62A read together with section 45B. ↩

  35. Section 62A. ↩

  36. Section 63. ↩

  37. Section 62B read with section 45D. ↩

  38. Section 62C and section 62D. ↩

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