Financial Crime World

Know Your Customer: The Crucial Rule for Businesses in South Africa

In a bid to combat financial crimes such as money laundering, tax evasion, and terrorist financing, the Financial Intelligence Centre Act (FICA) has introduced strict Know Your Customer (KYC) requirements for businesses operating in South Africa.

What is Know Your Customer?

The KYC principle is a fundamental aspect of FICA, which aims to ensure that clients are not involved in criminal or unscrupulous activities. Non-compliance can lead to significant reputational damage and limit a business’s ability to operate as usual.

Which Businesses Need to Comply?

FICA affects various industries, including:

  • Financial institutions
  • Attorneys
  • Trustees and executors
  • Estate agents
  • Trade and stock brokers
  • Management companies

To comply with FICA, businesses must establish and verify the identity of all clients before initiating a business relationship or concluding any transaction.

What are the Requirements for KYC Verification?

FICA outlines several responsibilities and measures that businesses must incorporate into their due diligence practices. These include:

  • Collecting and verifying identity documentation
  • Screening against warning lists
  • Conducting customer risk assessments
  • Investigating financial transactions

The Benefits of Knowing Your Customer

According to Rudi Kruger, general manager of Risk Management & International Online Services at LexisNexis SA, knowing your customer is crucial for business health. “Economic crime is a serious offense, and those found to be in business with suspicious entities face massive fines and the threat of a prison sentence,” he said.

Kruger added that handy online solutions like Lexis KYC can help businesses avoid compliance risk by vetting and monitoring customers, clients, agents, partners, suppliers, and other third parties quickly and comprehensively.

Enhanced Due Diligence with Lexis Diligence

In addition to Lexis KYC, LexisNexis SA offers Lexis Diligence, a solution that helps users save time and money by performing enhanced due diligence checks on individuals, clients, partners, and suppliers in-house. This online tool provides access to over 40 years of archived comprehensive adverse news, sanctions, and extensive warning lists, PEPs, director and shareholder listings, biographical references and directories, and comprehensive legal source material.

Kruger emphasized that Lexis Diligence helps protect businesses from compliance risks by verifying identities globally, screening against international sanctions, and monitoring potential security threats abroad.

Conclusion

In today’s complex business environment, knowing your customer is no longer an optional requirement but a necessity. By complying with FICA’s KYC regulations and using tools like Lexis KYC and Lexis Diligence, businesses can avoid compliance risk, protect their reputation, and operate efficiently in a rapidly changing world.