The Financial Intelligence Centre (FIC) released its 2022/23 Annual Report which contains an overview of the work that the FIC has been involved in between April 2022 – March 2023. During the reporting period, the FIC was instrumental in the recovery of more than R5.8 billion in criminal proceeds. The FIC produced 3 424 intelligence reports, related mostly to money laundering, fraud, bribery and corruption.
Below, we take a closer look at some of the highlights from the Report:
Compliance Inspections
The FIC and supervisory bodies (such as the Financial Sector Conduct Authority (FSCA) and South African Reserve Bank) are responsible for ensuring that accountable institutions comply with the FIC Act. Inspections are conducted by both the FIC and supervisory bodies to assess the level of institutions’ compliance with the Act.
In 2022/23, a total of 946 FIC Act compliance inspections were conducted. Supervisory bodies issued 544 inspection reports, while the FIC issued 402 inspection reports. Many of the FIC’s inspections were conducted as off-site (virtual) inspections.
The business sectors with the highest FIC Act inspection reports issued include legal practitioners (302), property practitioners (162), and gambling institutions in the North West (148). While the FSCA issued 20 FIC Act inspection reports on the FSP division, 40 reports on authorised users of exchange, and none for collective investment schemes.
Most of the inspections conducted by the FIC were on sectors rated as high risk and on institutions that were previously inspected during the two preceding financial years. The follow-up inspections were aimed at determining whether these institutions had improved their risk understanding and/or demonstrated a change in compliance behaviour.
Legal Practitioners
During 2022/23, 75% of the compliance inspections conducted by the FIC focused on legal practitioners. Approximately 79% percent of legal practitioners that were inspected, were found non-compliant. While the FIC Act inspections pointed to improvements in some aspects of compliance behaviour, the inspections revealed that a large proportion of legal practitioners required further guidance and monitoring. The FIC confirmed that due to the compliance concerns in this sector, legal practitioners will be subjected to continuous supervision oversight.
For more information on how Masthead can assist legal practitioners with becoming FICA compliant, click here.
Sanctions for non-compliance
The FIC and other supervisory bodies may impose a penalty, which is referred to as an administrative sanction, if it finds that an institution or person has failed to comply with the FIC Act and its directives.
During the 2022/23 financial year, the FIC and FSCA imposed sanctions on two institutions each. The total financial penalty of the sanctions imposed by the FIC was R872 388, of which R436 194 was payable and the remainder was suspended. While the financial penalty of the sanctions imposed by the FSCA amounted to R70 000.
The key areas of non-compliance in these four matters included the failure to report or timeously report cash threshold transactions, failure to update registration information with the FIC, failure to perform customer due diligence, and failure to screen clients.
Key policy developments and legislative changes
During the year under review, the FIC, as part of South Africa’s joint effort, provided considerable time and effort to address the deficiencies and recommendations of the Financial Action Task Force (FATF) regarding South Africa’s anti-money laundering, counter-financing of terrorism, and combatting proliferation financing (AML, CFT and CPF) regime. In February 2023, the decision was made by the FATF to place South Africa under increased monitoring, commonly known as greylisting.
Leading up to the greylisting, there have been numerous legislative changes to South Africa’s legal framework against money laundering and financing of terrorism. These include the changes brought about by the General Laws (anti-money laundering and combatting terrorism financing) Amendment Act, the amendments made to the FIC Act Schedules (list of accountable institutions and supervisory bodies), the changes to cash threshold reporting under the amended Money Laundering and Terrorist Financing Control Regulations, and the commencement of reporting international funds transfer reports under sections 31 and 56 of the FIC Act.
The legislative developments during 2022/23, also expanded the FIC’s powers and objectives and the FIC has emerged as a bigger, stronger and more effective financial intelligence unit.
A new division, Forensic Capability, will be established within the FIC and will become operational in the 2023/24 financial year. This new forensic unit will expand the FIC’s reach beyond intelligence analysis to include forensic reporting for law enforcement to use in complex money laundering cases. This division will also be able to present court testimony on the financial flows and the forensic products that they share with law enforcement authorities.
To read the FIC Annual Report, click here.