The Financial Intelligence Centre (FIC) recently issued Public Compliance Communication (PCC) 49 which provides guidance and clarity on certain money laundering (ML), terrorist financing (TF) and proliferation financing (PF) considerations and provides suggested resources that may be consulted in determining ML/TF/PF risks related to geographic areas.
An accountable institution relies on different ML/TF/PF indicators to determine the risk that a business relationship and or single transaction may pose to the accountable institution. These indicators, including the client, product or services, delivery channels and geographic areas, can assist in a comprehensive formulation of an understanding of ML/TF/PF risks and the application of an adequate risk-based approach. PCC 49 focuses on one of these indicators, namely, geographic areas. According to PCC 49, it is not the geographic area in and of itself that could pose a ML/TF/PF risk, but the features and activities associated with such a geographic area.
The PCC further states that there is no single list that accountable institutions can rely on to determine the ML/TF/PF risk posed by a particular geographic area. Rather, this determination is made by the accountable institutions taking into consideration applicable criteria. There are several open-source resources that accountable institutions may consider when determining the ML/TF/PF risks associated with geographic areas, some of which are listed in PCC 49.
At a minimum, the FIC considers the listings as issued by the FATF regarding ML/TF/PF risk per geographical area as a core data source that has certain implications for South Africa for non-consideration of these risks.
The PCC recommends that accountable institutions should not automatically adopt the ratings given by a particular source, instead accountable institutions must develop its own risk-based methodology in order to determine the risk associated with a geographic area in relation to their clients and product or service offering. A holistic view of all risk indicators will adequately determine the ML/TF/PF risk in relation to a business relationship or single transaction.