Towards the end of 2022, several amendments and proposed changes to the structure of South Africa's anti-money laundering and counter-terrorist regime were implemented. Amongst these was the inclusion of several new items to the list of entities that are deemed accountable institutions in terms of schedule 1 of the Financial Intelligence Centre Act, 2001 (Schedule 1).
The new entities now included in Schedule 1 and deemed to be accountable institutions are:
- a cooperative bank;
- a person who carries on the business of a credit provider;
- a person who carries on the business of a money or value transfer provider;
- a person who carries on the business of dealing in high-value goods in respect of any transaction where that business receives payment in any form to the value of ZAR100 000 or more, whether the payment is made in a single operation or in more than one operation that appears to be linked, where “high-value goods” means any item that is valued in that business at ZAR100 000 or more;
- The South African Mint Company (RF) (Pty) Ltd, only to the extent that it distributes non-circulation coins in retail trade for which it receives payment in any form to the value of ZAR100 000 or more, whether the payment is made in a single operation or in more than one linked operation;
- a person who carries on the business of one or more of the following activities or operations for or on behalf of a client:
- exchanging a crypto asset for a fiat currency or vice versa;
- exchanging one form of crypto asset for another;
- conducting a transaction that transfers a crypto asset from one crypto asset address or account to another;
- safekeeping or administration of a crypto asset or an instrument enabling control over a crypto asset; and
- participating in and providing financial services related to an issuer’s offer or sale of a crypto asset, where “crypto asset” means a digital representation of perceived value that can be traded or transferred electronically within a community of users of the internet who consider it as a medium of exchange, unit of account or store of value and use it for payment or investment purposes. It does not include a digital representation of a fiat currency or a security as defined in the Financial Markets Act, 2012; and
- a clearing system participant that facilitates or enables the origination or receipt of any electronic funds transfer and/or acts as an intermediary in receiving or transmitting the electronic funds transfer.
Other amendments have also been introduced to schedules 2 and 3 of FICA, which relate to supervisory bodies and reporting institutions.
The amendments to Schedule 1 took effect on 19 December 2022. The amendments do not contain transitional provisions and the obligations to comply with FICA as an accountable institution are officially in effect. Persons regarded as accountable institutions are required to register with the Financial Intelligence Centre (FIC) within 90 days from the date on which new business as an accountable institution commenced, which means that new accountable institutions have until 19 March 2023 to register with the FIC. The failure to register with the FIC can lead to administrative sanctions which include monetary penalties.
Not only are the new accountable institutions required to register with the FIC, but they must also have their risk management and compliance programmes (RMCPs) in place. RMCPs deal with the processes and procedures that an accountable institution must implement to comply with its FICA obligations. The obligations include implementing customer identification and verification processes, conducting customer due diligence, appointing a compliance officer, training employees on FICA compliance and undertaking business risk assessments.
The FIC has indicated that it intends to dedicate the first 18 months following the commencement of the amendments towards entrenching the risk and compliance provisions and implementation of FICA amongst the new institutions in Schedule 1. In respect of the new institutions, the FIC and other supervisory bodies do not envisage issuing financial penalties for non-compliance with FICA during this 18-month period. Supervisory bodies will, however, conduct inspections and, where warranted, will issue remedial administrative sanctions, based on a risk-based approach, to correct identified areas of non-compliance.
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