The FIC Amendment Bill will introduce a new section (Section 26A), titled “Notification of persons and entities identified by Security Council of the United Nations”. This section will be prompted if the UN Security Council adopts a Resolution requiring UN member states to impose certain actions (financial sanctions) against certain identified persons or entities, and requires the Minister of Finance to announce the adoption of the resolution by notice in the Gazette and other appropriate means of publication.
After publication of the notice by the Minister, the Director of the Financial Intelligence Centre (FIC) must also give notice of those persons and entities which are the subject of the resolution as well as any decision of the Security Council to no longer apply the resolution to previously identified persons or entities.
Prohibitions relating to identified persons and entities identified by Security Council of the United Nations
The section above will be given further effect with a newly inserted Section 26B which will prohibit the following activities relating to property, services and economic support linked to the identified persons or entities mentioned above:
i) the acquisition, collection, use, possession or ownership of property;
ii) to provide, make available or invite a person to provide or make available property;
iii) to provide, make available or invite a person to provide any financial service or other service;
iv) to provide, make available or invite a person to provide or make available economic support; or
v) to facilitate the acquisition, collection, use or provision of property, or any financial or other service, or of economic support.
No person may therefore directly or indirectly partake in any of the above activities while the person knows, or reasonably ought to have known or suspected, that such property will be used under the control of a person or entity identified in a resolution of the Security Council.
No person may enter into an arrangement which could have the effect of:
i) making it possible for an identified person or entity to retain or control property;
ii) to convert property;
iii) to conceal or disguise the nature, source, location or movement of the property, the ownership thereof or any interest anyone may have therein;
iv) removing the property from a jurisdiction; or
v) transferring the property to a nominee.
The following actions in respect of property connected to identified persons or actions are prohibited:
(i) entering into any transaction;
(ii) facilitating any transaction; or
(iii) performing any other act in connection with such property.
Scrutinising client information
The current section 28A will also include an additional subsection which will require accountable institutions to scrutinise its information concerning clients with whom it has business relationships in order to determine whether any such client is a person or entity mentioned in the proclamation by the President or notice by the Director.
Consequences of Contravention
Any person who contravenes a prohibition relating to persons and entities identified by the UN Security Council will be guilty of an offence. The Financial Intelligence Centre or a supervisory body could also impose an administrative sanction for the contravention.
Accountable institutions will, therefore, have to include a process to make sure that appropriate steps are taken to screen potential clients against the list of persons or entities described above, before entering into a business relationship with the client or concluding any transactions. In a previous article, we spoke about the requirement to implement a process to conduct ongoing due diligence of existing clients. As part of this process, accountable institutions will have to include a ‘screening’ step.
In order to prepare for these new requirements, FSPs need to consider the types of products, services and clients in their business from the perspective of money laundering risk as the basis for developing a risk-based framework which sets out the approach depending on the level of risk.