Financial Crime World

South Africa’s Fight Against Financial Crime: A Guide for Accountable Institutions

Introduction

In an effort to combat money laundering, terrorist financing, and proliferation financing, the South African government has implemented stringent regulations for accountable institutions. The Financial Intelligence Centre Act (FIC Act) requires all listed institutions to file regulatory reports with the Financial Intelligence Centre (FIC).

Defining Reportable Transactions or Behavior

The FIC Act defines reportable transactions or behavior as:

  • Cash transactions above a prescribed threshold of R49,999.99
  • Suspicious and unusual transactions
  • Terrorist property dealings

To identify such transactions, accountable institutions must perform transaction monitoring, which is an essential element of South Africa’s anti-money laundering (AML), counter-terrorism financing (CTF) and counter-proliferation financing (CPF) regime.

Automating Transaction Monitoring

The FIC has issued Directive 5, outlining the requirements for accountable institutions to comply with when using automated transaction monitoring systems. Public compliance communication 45 provides guidance on Directive 5.

Registering with the Financial Intelligence Centre

Before filing a regulatory report, accountable institutions must register with the FIC, which is free and can be done through the online registration and reporting system.

New Sectors Added to Schedule 1

Recent amendments to the FIC Act have added new sectors to Schedule 1, including:

  • Designated non-financial businesses and professions (DNFBPs) such as:
    • Trust and company service providers
    • Credit providers
    • Legal practitioners
    • High-value goods dealers
    • Money and value transfer service providers
    • Crypto asset service providers

Regulatory Reporting Streams for DNFBP Accountable Institutions

There are three main regulatory reporting streams for DNFBP accountable institutions:

  • Cash threshold reports: filed when a cash transaction exceeds the prescribed threshold of R49,999.99
  • Suspicious and unusual transaction reports: submitted if an institution suspects that a transaction or activity involves money laundering, terrorist financing, or financial sanctions
  • Terrorist property reports: filed when an institution possesses or controls property of a person or entity listed on a United Nations Security Council targeted financial sanctions list

International Funds Transfer Reports (IFTRs)

Only certain accountable institutions have the obligation to file IFTRs, including:

  • Authorised dealers
  • Authorised dealers with limited authority
  • Certain financial services providers

Consequences of Non-Compliance

Failure to comply with these regulations can result in serious consequences, including fines and imprisonment. Therefore, it is crucial for accountable institutions to understand their reporting obligations and ensure that they are compliant with the FIC Act.

Conclusion

South Africa’s fight against financial crime requires the cooperation of all accountable institutions. By understanding their reporting obligations and complying with the FIC Act, these institutions can play a vital role in preventing money laundering, terrorist financing, and proliferation financing.