The fight against money laundering and terrorism financing dates back many years. With the use of technology in banking, innovative solutions in the areas of AML (anti-money laundering) and TF (transaction fraud) have surfaced, and continue to grow at a fast pace around the world.
In the recent Basal AML 2022 index, which rates the world’s risk of ML (Money laundering) &TF (Transaction fraud) based on data from the Financial Action Task Force and World Bank, South Africa took the 21st position among 27 countries in sub-Saharan Africa. Countries establish anti-money laundering organizations to combat this illegal activity.
This article talks about what you need to know about the FICA law in South Africa. It addresses several of your frequently asked questions, including ‘how do you become FICA compliant?" and "the FICA Act AML Requirements," among several others. Have a good read.
What does "FICA" stand for?
FICA (Financial Intelligence Centre Act) is a law implemented in South Africa to help combat financial crimes such as money laundering, terrorist financing activities and legislation, fraud, identity theft, and tax evasion.
Popularly called “the FIC Act," it was enacted on the 1st of June 2001 as a law to bring South Africa into alignment with the International Standard set by the Financial Action Task Force (FATF), just like other countries.
The Financial Intelligence Center (FIC) in South Africa is the anti-money regulatory body responsible for enforcing the FICA law in South Africa and ensuring that citizens are FICA compliant and meet FICA requirements. The FIC was established in 2003, two years after the implementation of the FIC Act, to maintain South Africa’s financial system.
With FICA, the South African government can monitor the movement of money, especially from suspicious accounts that may otherwise use it for illegal activities.
The Benefits of Implementing FICA: Why is FICA Compliance Important for Financial Institutions and Businesses in South Africa?
So, you could ask: What exactly is the purpose of the FICA law in South Africa? Why should businesses and banks become FICA compliant?
- FICA compliance for financial institutions and businesses allows transparency and a stable financial system.
- Financial institutions and businesses that meet the FICA Act AML requirements can avoid the risk of being sanctioned.
- FICA-compliant institutions can easily trace funds for terrorism, preventing further illegal activities,
- A country or institution where FICA AML requirements are met as deemed fit by the FAFT law in South Africa provides a safe environment for legitimate businesses to thrive, and an environment unconducive for financial criminals.
Is there a FICA law in other countries?
The FICA act is restricted to South Africa; however, there are similar anti-money laundering policies and laws in other countries.
Who Does the FICA Law in South Africa Apply?
The FIC Act applies to every financial institution, including estate agents, investment management companies, bankers, trustees, attorneys, executors, and more.
How do you become FICA-compliant?
Knowing the purpose and importance of the FIC law in South Africa, every existing or intending business owner in South Africa, should be asking, "How do I become FICA compliant?"
To provide a basic understanding, below are some of the FICA documents required for compliance:
The FICA Act AML Requirements
Bank requirements for the FICA verification process are the specific FICA verification documents you need to be compliant as a business owner in South Africa. The next time you visit a bank in South Africa, ensure you tick this FICA verification checklist.
The natural person identity verification documents for South Africa FICA Requirements include:
- For South African Citizens: The Green bar-coded identity document, Smart ID card, a valid passport, a valid driver’s license, or a valid temporary ID document
- For Foreigners: A valid passport, a valid asylum seeker or refugee permit, or a valid work permit.
- For Minors: Birth certificate, letter of legal guardianship (if applicable), or ID document of parent or guardian.
Steps to Becoming FICA Compliant in South Africa
- Register with the FIC Act: One of the bank's requirements for FICA verification of prospective clients is registration with the FIC.
- Appoint the right AML compliance officer: Selecting the right AML compliance officer is crucial to the success of a business, as failure to comply can lead to severe legal penalties. Hence, there should be no margin for error when choosing an AML compliance officer for an institution.
- Carry out appropriate customer due diligence The FICA Act and AML requirements are used in CDD processes to verify that your clients are who they say they are.
- To control and manage money laundering risks, use a risk-based approach in accordance with the FICA Act AML requirements on all business relationships.
- Keeping and sending records of all transactions to the Financial Intelligence Center
- Employee AML/CFT training is a continuous and mandatory requirement for meeting the AML requirements of the FICA Act.
FICA Fines for Non-Compliance: What Are the Consequences of Non-FICA Compliance?
FICA non-compliance is related to failures to register, adopt a risk management and compliance program, conduct CDD, and report. FICA fines for non-compliance usually include the following:
- A public reprove
- A corrective directive
- Suspension of business activities
- Grievous violations can attract a reparation of up to R100 million, and in some cases, the deterrent can be imprisoned for up to 15 years.
In Conclusion: The FICA Law: A Good or Bad Policy?
Adopting and adhering to the FICA law is beneficial to any business or financial institution. With the FICA law, you can reveal, prevent, and monitor every illegal financial activity in your organization.
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