Financial Crime World

SA’s FICA Act: A Comprehensive Guide

Understanding the Law

South Africa has strengthened its ability to combat financial crimes and illicit flows with the Financial Intelligence Centre Amendment Act (FICA Act). The law amends the existing Financial Intelligence Centre Act of 2001, aiming to tackle money laundering, corruption, terrorism financing, and tax evasion.

Fighting Financial Crime: How the FICA Act Works

The FICA Act requires financial entities to “know their customers” through a process known as Know-Your-Customer (KYC) or Customer Due Diligence (CDD). This requirement was first introduced in South Africa in 2001 and has been strengthened by the new law. The CDD/KYC system involves:

Key Components

  • Identifying Ultimate Beneficiaries: Financial entities must identify natural persons who ultimately own and use legal structures like companies and trusts.
  • Risk-Based System: A risk-based approach to KYC makes it easier for customers to comply with the FICA Act if they pose less risk of committing financial crimes.
  • Managing Relationships: Financial entities must better manage their relationships with foreign Prominent Public Officials and domestic Prominent Influential Persons.
  • Freezing Assets: Financial entities assist in freezing assets for individuals identified by the UN Security Council as involved in terrorism.

Who Will Be Affected

The FICA Act applies to everyone in South Africa, but some individuals will be subject to enhanced CDD/KYC:

Individuals Under Scrutiny

  • Foreign politicians (Politically Exposed Persons) will undergo an enhanced CDD/KYC.
  • Domestic politicians/senior Government officials/certain persons in certain companies doing business with Government (domestic Prominent Influential Persons) who might be targets of financial crimes, i.e. are considered risky, will also go through an enhanced CDD/KYC.
  • Companies and trusts with beneficial owners will be affected.

Why the Law Matters

The FICA Act ensures that:

Key Benefits

  • Criminals cannot use South Africa’s financial system to commit crime or hide its proceeds.
  • The law supports South Africa’s economic growth by ensuring it remains part of the global financial system, which facilitates trade and investment flows.
  • The law upholds membership commitments to the Financial Action Task Force (FATF) and the United Nations (UN).
  • It allows the government and business to continue borrowing internationally to deliver critical social services.

What the FICA Act Is Not About

The amendments are not about giving banks unlimited power, but rather ensuring that they comply with the FICA Act. The law does not:

Key Exclusions

  • Deem Prominent Influential Persons like politicians or Government tender recipients as criminals and therefore not able to transact with banks.
  • Introduce crimes of bribery, money laundering, or terror financing, as these are already contained in other Acts preceding it.
  • Empower supervisors to investigate and criminally prosecute; only law enforcement agencies can do so.
  • Trump the Constitution.