Various supervisory bodies have consulted the Financial Intelligence Centre (FIC) regarding the COVID-19 pandemic and possible impact on accountable institutions. These supervisory bodies include the Prudential Authority, the National Payment System Department, the Financial Surveillance Department of the South African Reserve Bank, as well as the Financial Sector Conduct Authority (FSCA) (jointly referred to as the Authorities). The supervisory body responses were published in Joint Communication 2 of 2020.
The Communication sets out the Authorities’ current position concerning the pandemic and its impact on the ability of accountable institutions to adhere to their obligations regarding customer due diligence, particularly conducting on-going due diligence, in terms of section 21C of the FIC Act. Accountable institutions are urged to continue to act in good faith towards fulfilling their obligations to the greatest extent possible, and to make prudent decisions regarding the management of money laundering, terrorist financing, and proliferation financing risks (ML/TF/PF risks).
The Authorities acknowledge the impact of the pandemic on the operational capability of accountable institutions to operate effectively and to conduct ongoing due diligence in a face to face environment given the social distancing and other measures in place to mitigate the spread of COVID-19.
The Communication advises that the Authorities recognise that during this period, criminals may take advantage of COVID-19 and perpetuate financial fraud and exploitation scams, including advertising and trafficking in counterfeit products, offering fraudulent investment opportunities, and engaging in phishing schemes that prey on COVID-19 related fears, and purport to be bank-related fundraising for COVID-19 human relief purposes. Malicious or fraudulent cybercrimes, fundraising for fake charities, and various medical scams targeting innocent victims may increase.
Impact on regulatory requirements
The Authorities consider it critical for accountable institutions to continue to comply with their legislative obligations in terms of the FIC Act and are of the view that the use of financial technology will assist in managing some of the current challenges. Guidance has also been recently published by the FATF with regards to digital identity and includes the benefits of privacy and convenience of identifying clients and prospective clients remotely for both onboarding and conducting transactions while also mitigating ML/TF/PF risks.
Given the impact of the lockdown, the Communication advises, for those existing clients in respect of whom on-going due diligence was required to take place from 1 March to 4 May 2020 in a face-to face manner, the Authorities do not expect that there should be any freezing or closure of accounts due to the inability of accountable institutions to obtain identification and verification information, or any other information for the purpose of on-going due diligence where the information would have been necessary to have been obtained in a face-to-face manner.
The Authorities expect that accountable institutions would have already commenced with planning and discussions as to how these clients will be dealt with after the lockdown period, and communicate detailed plans with requisite deadlines for completion, in writing to their respective supervisory body by no later than 15 May 2020. Each accountable institution’s submitted plan should contain completion dates that do not extend further than 4 December 2020.
Accountable institutions are also advised to remain vigilant with regard to financial crimes and ensure that they continue to comply with their reporting obligations in terms of the FIC Act. Where an accountable institution is not able to timeously report a suspicious and unusual transaction or a terrorist property report, they may apply to the FIC for an extension of the reporting period in terms of Regulation 24 of the Money Laundering and Terrorist Financing Control Regulations.