The Financial Intelligence Centre (FIC) recently published Directive 3A and Public Compliance Communication (PCC) 50A. These documents provide guidance on the notification and mitigation of reporting failures under the FIC Act.
The Directive and PCC applies to all accountable institutions and to other persons who have an obligation to file reports with the FIC. These reports are:
- Section 28 – Cash threshold reporting
- Section 28A – Terrorist property reporting
- Section 29 – Suspicious and unusual transaction reporting
- Section 31 – International funds transfer reporting
A ‘Reporting failure’ refers to where a report ought to be filed with the FIC and the reporter either failed to submit the report or filed a defective report. A ‘Defective report’ refers to a report that has been filed with the FIC with the incorrect or incomplete prescribed information.
Initial guidance on reporting failures was published by the FIC in 2014 (Directive 3) and 2021 (PCC 50), however these publications were issued before the commencement of Section 31 of the FIC Act, which contains the International Funds Transfer Reporting (IFTR) obligation and Section 56 which deals with the failure to report electronic transfers.
Section 31 commenced on 1 February 2023, and the FIC has now updated the relevant Directive and PCC to include the requirement to notify the FIC of a failure to submit a IFTR or the submission of a defective IFTR, and the required remediation thereof. Further, Directive 3A has been updated to include reference to proliferation financing to align with Section 3 of the FIC Act.
PCC 50A must be read together with Directive 3A as it provides guidance on measures aimed at preventing, remediating and mitigating reporting failures and elaborates on the process to be followed when applicable. It expands on measures to mitigate the loss of intelligence data to the FIC which occurs due to reporting failures and provides guidance on mitigating defective reports.
Non-submitted reports
Where a person or institution becomes aware of a reporting failure, they must mitigate the loss of intelligence data to the FIC by following the Directive 3A process, which includes:
- Notify the FIC, in writing, of their reporting failures relating to the non-submission of a report as soon as the reporter becomes aware thereof. PCC 50A sets out the information that the notification must contain such as the nature and extent of the loss of data and the proposed remediation actions. The notification must be sent to the Executive Manager: Compliance and Prevention at Directive3@fic.gov.za.
- Request an engagement with the FIC to discuss relevant mitigation factors.
Defective reports
Filing a report with the incorrect or incomplete prescribed particulars may result in either a report failing the validation process on the FIC’s reporting platform (goAML) and being rejected or a report being received by the FIC with incomplete or false data. In both these instances the defective report must be remediated. Directive 3A does not apply in instances where a report has been submitted, but is defective.
The reporter is required to remediate a defective report either as soon as the reporter is notified that the report is rejected by the goAML platform or as soon as the reporter becomes aware that the report contains inaccurate or incorrect data. This process is set out in goAML Notice 4A.
Measures to remediate a defective report include:
- Correcting the information
- Using the correct prescribed format for reporting; and
- Submitting the remediated report on the goAML platform
Recommendations to limit reporting errors
1. Information required in terms of the Money Laundering and Terrorist Financing Control (MLTFC) regulations
Reporting entities must adhere to the FIC Act together with the MLTFC Regulations when submitting reports to the FIC, as well as the applicable prescribed reporting platform. Chapter 4 of the MLTFC Regulations sets out the requirements that apply to reporting.
2. Pre-validation of report information
The FIC recommends that reporters conduct pre-validation of all reports before filing the reports. This is to help prevent report failures or rejections. This will also ensure that prescribed and accurate information is reported to the FIC within the prescribed format and time period. Pre-validation includes the reporter checking whether the report includes all mandatory information and that which is readily available as prescribed for the report type in terms of the MLTFC Regulations.
3. Quality reviews and assurance processes
Reporting entities should follow a multi-disciplinary approach that will enable them to apply adequate quality control measures and implement assurance processes to identify potential issues relating to the submission of a report to the FIC.
By following Directive 3A and PCC 50A, institutions can ensure that they address reporting failures and remediate defective reports promptly and effectively, maintaining compliance with the FIC Act and supporting the FIC’s mandate to combat financial crime.
Do you need assistance with your FICA compliance?
Masthead has been helping businesses implement and comply with FICA requirements since 2004. We provide tailored FICA compliance solutions to help accountable institutions meet regulatory requirements efficiently and effectively.
Our services include:
- FICA Implementation
- FICA Compliance Monitoring
- FICA RMCP Implementation
- FICA Risk and Compliance Return
- FIC Inspection Preparation and Support
- FICA Training
For assistance or more information, get in touch with us or contact your nearest Masthead Regional Office.