Financial Crime World

Accountable Institutions Must Determine Course of Action on Targeted Financial Sanctions

In accordance with their obligations and risk-based approach, accountable institutions are required to take a proactive role in determining the course of action when it comes to targeted financial sanctions (TFS) within South Africa.

TFS Application

According to Section 26A, 26B, 26C, and 28A of the Financial Intelligence Centre Act (FIC), TFS only applies to designated persons or entities listed on:

  • The Terrorist Financing Sanctions (TFS) list published on the FIC website
  • The United Nations Security Council Consolidated Sanctions List

Procedures for Accountable Institutions

Accountable institutions are strongly encouraged to submit a section 29 suspicious and unusual transaction report if there is a true match against other domestic, regional, and unilateral sanctions lists. They are also advised to seek further guidance from the relevant regulator who published the relevant other domestic, regional, and unilateral sanctions list in such cases.

Freeze of Designated Person’s or Entity’s Property

When an accountable institution identifies a designated person or entity as its client or linked to its client, it must:

  • Immediately cease any activity in relation to that designated person or entity
  • Not release any property to them (commonly referred to as a “freeze”)

Communication with Clients

The Centre does not prescribe the communication that an accountable institution provides to a client, person, or entity upon determining that such client is a designated person or entity impacted by TFS and an asset freeze. However, accountable institutions must have a documented process in their Risk Management Control Policy (RMCP) to ensure the freezing of a designated person’s or entity’s property immediately.

Failure to Adhere to Prohibition

Failure to adhere to the prohibition in terms of Section 26B of the FIC Act constitutes an offence in terms of Section 49A of the FIC Act. Accountable institutions may not proceed to provide or release any property to a designated person or entity unless prior written permission has been obtained from:

  • The Minister of Finance
  • The Director of the Centre acting upon a delegation from the Minister of Finance

Example: Bank C and Mr. T

In an example given by the Centre, Bank C, which holds various funds of Mr. T, who is a designated person on the TFS list, must:

  • Immediately cease to release or facilitate any transactions on behalf of Mr. T
  • Apply an automatic freeze on his funds
  • Report Mr. T as a true match and client, as well as the freezing of his assets to the Centre

Similar Provisions in POCDATARA

Similar provisions apply in terms of Section 4 of the Prevention and Combating of Terrorist Activities Act (POCDATARA), which requires accountable institutions to:

  • Immediately cease any activity in relation to a designated person or entity or terrorist-related activity

Documentation and Compliance

Accountable institutions must ensure that they have a documented process in their RMCP to comply with these requirements. They must not lift the freeze unless:

  • The designated person is de-listed by the UNSC and communicated on the UNSC Consolidated List
  • A permit has been obtained in terms of Section 26C of the FIC Act