Corporate Accountability and Human Rights: Aligning South African Business Practices with Constitutional Values
February 27, 2024
Compliance and Risk Management
The FIC Urges Legal Practitioners to Submit All Outstanding Risk And Compliance Returns
The Financial Action Task Force (FATF) to which South Africa has been a member to since 2003, grey listed the country almost a year ago to the day for among other things, not having sufficient safeguards established to monitor and combat money laundering and terrorist financing activities. As a result of our grey list status and with the aim of exiting the grey list the FATF provided us with guidelines which placed the onus on South Africa to adequately demonstrate its remediation of certain action items which were raised by the FATF.
In line with the guidelines proposed by the FATF, the Financial Intelligence Centre (FIC) was specifically tasked with the identification of entities which may be at a high risk of being taken advantage of for the purposes of money laundering, terrorist financing and proliferation financing. In view of the task given by the FATF, the FIC then issued Directive 6 and 7 (2023) which required all accountable institutions to provide information regarding their understanding of money laundering, terrorist financing and proliferation financing.
Directive 6 which was issued by the FIC on 31 March 2023 with the purpose of informing all accountable institutions which are designated financial businesses and professionals as mentioned in Schedule 1 of the Financial Intelligence Centre Act, 2001 (FIC Act) to submit their Risk and Compliance Returns (RCRs) by no later than 31 May 2023. More specifically the accountable institutions to which this directive applies as per Schedule 1 includes Item 1 – legal practitioners; item 2 – trust service providers and company service providers; item 3 – estate agents and item 9 – casinos and gambling institutions. The information received by the submission of RCRs will assist the FIC in comprehending the current level of awareness and compliance of the responding accountable institution with the FIC Act and in identifying the money laundering, terrorist financing and proliferation financing risks being faced by these institutions as mentioned above.
In terms of Schedule 1 of the FIC Act, legal practitioners refers to: a person who is admitted and enrolled to practice as a legal practitioner as contemplated in section 24(1) of the Legal Practice Act No 28 of 2014, and who is: (i) an attorney (including a conveyancer or notary) practicing for his/her own account or (ii) an advocate as contemplated in section 34(2)(a)(ii) of that Act. Commercial juristic entities as contemplated in section 34(7) of the Legal Practice Act, 2014 also fall within this category.
More recently on 2 February 2024 the FIC via a media release stated that there has been “a disappointingly poor response from the estate agent and legal practitioner sectors” highlighting that those who have failed to timeously submit their RCRs will be identified by the FIC as delinquent high risk entities requiring inspection. The media release by the FIC serves as a reminder to all those accountable institutions which fall under Schedule 1 of the FIC Act that although the deadline for submission of the RCRs has passed, there is still an opportunity to submit your RCRs as the platform on the FIC website remains open and accessible. The FIC has urged all relevant accountable institutions to comply with Directive 6 as soon as possible as the FIC is required to report back to the FATF on progress made in this area by April 2024.
It is of paramount importance to note that a directive is a rule made by a supervisory body or in this case the FIC which creates enforceable obligations on accountable institutions which fall within its scope and non-compliance thereof could result in unwanted consequences. Non-compliance with the Directive could result in administrative action in respect of section 62E of the FIC Act, which provides as follows: “an accountable institution that fails to comply with a directive of the Centre or a supervisory body in terms of section 43A (3) or 45C(3)(c) is non-compliant and is subject to an administrative sanction”. Additionally, to the administrative action accountable institutions will be regarded by the FIC as delinquent and high-risk entities requiring inspection.
There are a few key take always from Directive 6 namely; (i) the completion of the Risk and Compliance Return is compulsory for all accountable institutions specified in this Directive, (ii) the Risk and Compliance Return covers the reporting period from 1 April 2022 to 31 March 2023, both dates being inclusive, (iii) The Risk and Compliance Return is an automated return, accountable institutions are required to populate the information directly via a link as made available on the FIC website.
To avoid non-compliance and as a result thereof administration action, all accountable institutions more specifically legal practitioners as mentioned in schedule 1 of the FIC Act are reminded and urged to ensure that their RCRs are submitted to the FIC as soon as possible.
Post Tags:
Share This :
Get in touch
To reach out to MVR Attorneys, please contact our experienced team. We pride ourselves on taking care of our clients.
