Financial Crime World

Targeted Financial Sanctions (TFS) in South Africa: A Comprehensive Guidance

===========================================================

Key Obligations for Accountable Institutions

Overview

Accountable institutions, including banks and financial services providers, have a critical role to play in preventing the financing of terrorism, proliferation of weapons of mass destruction, and related activities. This guidance outlines the key obligations and responsibilities of accountable institutions in complying with Targeted Financial Sanctions (TFS) regulations.

Key Points

1. Accountable Institutions

  • These are banks, financial services providers, and other relevant organizations that must comply with TFS regulations.
  • They include:
    • Banks
    • Financial services providers
    • Other relevant organizations

2. Designated Persons/Entities

  • Individuals or entities listed on the United Nations Security Council (UNSC) Consolidated List or the South African Centre for Intelligence and Security’s (Centre) Targeted Financial Sanctions (TFS) list.
  • These include:
    • Listed individuals
    • Entities connected to these individuals
    • Organizations that support terrorism or proliferation

3. Freezing of Assets

  • Accountable institutions must immediately freeze assets owned, held, or controlled by designated persons or entities.
  • This includes:
    • Bank accounts
    • Investment accounts
    • Other financial assets

4. Automatic Freeze

  • If an accountable institution holds assets in its possession or control linked to a designated person or entity, it must apply an automatic freeze without delay.
  • This ensures that assets are frozen immediately, even if the institution is not aware of the designation.

5. Reporting Requirements

  • Accountable institutions must report matches with designated persons or entities to the Centre and apply a freeze on their assets.
  • Reporting requirements include:
    • Providing information on matched clients
    • Freezing assets linked to designated individuals or entities

6. Permitted Financial Services

  • With prior written permission from the Minister of Finance or the Director of the Centre, accountable institutions can release certain financial services to designated persons or entities.
  • Permission is required for:
    • Releasing frozen funds
    • Providing new financial services

7. Lifting of Freeze

  • The freeze can be lifted only when the designated person is de-listed from the UNSC Consolidated List and the TFS list, or a permit is obtained in terms of section 26C of the Financial Intelligence Centre Act (FIC Act).
  • This ensures that assets are only released when the designation has been removed.

8. Domestic Designation

  • Section 4 of the Prevention and Combatting of Terrorist and Related Activities Act (POCDATARA Act) requires accountable institutions to immediately cease any activity related to designated persons or entities.
  • Institutions must:
    • Stop transactions with designated individuals or entities
    • Freeze assets linked to these individuals or entities

9. Court Orders

  • Accountable institutions must scrutinize information concerning their clients against court orders made in terms of section 23 of the POCDATARA Act, and apply a freeze on assets linked to specified offenses or designated persons.
  • Institutions must:
    • Check client information against court orders
    • Freeze assets linked to specified offenses

Example: Applying TFS Regulations

Scenario:

A bank (Accountable Institution) holds funds in cheque and investment accounts belonging to Mr. T, who is listed as a designated person on the Centre’s TFS list.

Action:

  • The bank must immediately cease releasing or facilitating transactions on behalf of Mr. T.
  • An automatic freeze must be applied on his assets.
  • The bank must report Mr. T as a true match and client to the Centre.

This guidance emphasizes the importance of accountable institutions in preventing the financing of terrorism, proliferation of weapons of mass destruction, and related activities by freezing assets of designated persons or entities.