The Financial Intelligence Centre (FIC) recently published Public Compliance Communication 44 (PCC 44) that provides guidance on the targeted financial sanctions regimes which are part of the regulatory framework of South Africa.
South Africa’s targeted financial sanctions regimes are implemented through the country’s anti-money laundering and combating of the financing of terrorism (AML/CFT) legislative framework namely the Financial Intelligence Centre Act (FICA) and the Protection of Constitutional Democracy Against Terrorist and Related Activities Act (POCDATARA).
Sanctions aimed at combating terrorism and terrorist related activity
The POCDATARA Act criminalises the financing and facilitating of terrorist and related activity. This offence applies to everyone, not just accountable institutions and reporting institutions. PCC 42 states that in terms of section 25 of the POCDATARA Act, the President of South Africa must give notice when any specific entity is designated in a resolution of the UNSC. Such resolutions designate the following sanctioned persons or entities; ISIL (Da’esh), Al-Qaida, and associated individuals, groups, undertakings and entities in relation to terrorist financing. The provisions as set out in section 25 of the POCDATARA Act are part of the targeted financial sanctions. The list as published by the President is available on the South African Police Services (SAPS) website and a consolidated list is available on the UNSC website.
Sanctions aimed at combating the proliferation of weapons of mass destruction, oppressive regimes and human rights abuses
Sanctions regulated in terms of sections 26A, 26B and 26C of the FIC Act are referred to as targeted financial sanctions. Section 26B read together with section 49A of the FIC Act, prohibits the financing of persons or entities who are subject to targeted financial sanctions in terms of section 26A of the FIC Act. The Director of the FIC must give notice of persons or entities who have been designated as sanctioned in a resolution of the UNSC. Such designations are related to threats to international peace and security, which includes the proliferation of weapons of mass destruction, oppressive regimes and/or human rights abuses. The list as published by the Director of the FIC is made available on the FIC website and is referred to as the FIC targeted financial sanctions list (TFS list). The FIC Act prohibits any dealings with a person or an entity that has been identified pursuant to a resolution of the Security Council of the United Nations. The TFS list can be used to access information on persons and entities listed in resolutions by the Security Council of the United Nations.
The FIC Act places certain obligations on accountable and reporting institutions and other persons to implement certain measures in relation to the targeted financial sanctions regimes.
Accountable Institutions are required to know the clients that they deal with and submit reports to the FIC if the need arises. To determine if they are dealing with a person or entity on the TFS List, accountable institutions are required to scrutinise the information which they have regarding their clients. Should an accountable institution identify that a client is a person or entity listed in terms of section 25 of the POCDATARA Act, they are required to freeze all property (including funds) associated to the sanctioned person or entity and would have to report this to the FIC within 5 business days.
The FIC advises that it is good practice to scrutinise client information against both the UNSC consolidated sanctions list and the FIC TFS list. Checking a prospective client against the most up-to-date lists should form part of the due diligence process. Where a client or potential client is flagged on a UN resolution then swift action must be taken to freeze funds and or property, not to proceed with the transaction or business relationship and to report accordingly.
The PCC 42 provides links to previous Guidance Notes published by the FIC to assist accountable institutions to discharge their obligations. It also provides links and details of the websites to access the sanctions lists as well as offers methods for scrutinising client information.
Accountable institutions must document this process in their Risk Management and Compliance Programme.