The Financial Intelligence Centre Amendment Act (Amendment Act) brought about various changes yet many financial advice businesses have not comprehended the effect of such changes. This places them at risk in the event of a compliance inspection. Some important changes brought by the Amendment Act is that it imposed a new set of obligations on accountable institutions, in particular the requirement to implement a risk-based approach to addressing money laundering and terrorist financing risks. It is also important to understand the role of the person appointed to monitor the compliance function and the scope of the compliance function in an accountable institution.
Under the old Section 43(b), compliance officers could be held personally liable for companies not complying with FICA. The Amendment Act has deleted section 43(b) from the statute and inserted a new section 42A. This has changed the responsibility of the Anti-Money Laundering/Counter Financing of Terrorism (AML/CFT) Compliance Officer and related compliance function and shifted the risk of non-compliance from the compliance officer to the directors or senior management.
In terms of the Amendment Act, here are the points you need to know about the AML/CFT Compliance Officer and the compliance function:
- An accountable institution which is a legal person must assign an AML/CFT Compliance Officer.
A person, who we refer to as the AML/CFT Compliance Officer, with sufficient competence and seniority must be assigned. The AML/CFT Compliance Officer is responsible for ensuring the effectiveness of the compliance function of the accountable institution. Accountable institutions which are not legal persons (excluding sole proprietors) must appoint someone to help the person(s) exercising the highest level of authority in the business in discharging their obligations.
The accountable institution must address the issue of who the compliance function will be delegated to, although the ultimate responsibility for compliance with FICA and the accountable institution’s RMCP rests in the hands of the board of directors, senior management, or the person(s) exercising the highest level of authority in an accountable institution, as the case may be.
- An AML/CFT Compliance Officer differs from a FAIS Compliance Officer.
A FAIS Compliance Officer’s responsibility is to assist a business to comply with FAIS and the regulations relating to financial advisory and intermediary services. This role differs from the AML/CFT Compliance Officer. Although the same person in your business could fill both roles, it is not ideal given the broad scope of each piece of legislation. An external FAIS Compliance Officer is also generally not appointed as the AML/CFT Compliance Officer, as he or she is not part of the day-to-day operations of the business.
- There are three key compliance stakeholders in respect of compliance with FICA and the RMCP.
These are the board of directors or senior management, the AML/CFT Compliance Officer and the Compliance Function.
The directors or senior management are ultimately responsible for compliance with FICA and your Risk Management and Compliance Programme (RMCP). They need to ensure your business policies, procedures and processes are designed to limit and control risks of money laundering and terrorist financing. They set the tone at the top and should create a culture of compliance and formulate and communicate the AML/CFT risk appetite of your business.
The AML/CFT Compliance Officer should play a central role in building a solid foundation for AML/CFT compliance. This person would typically draft and maintain the RMCP, provide support in respect of training, discharging of the reporting and registration requirements in terms of FICA, and assist your business in its application and compliance with the RMCP.
In terms of Section 42A(2), your business needs to establish a compliance function with the necessary staff, whose role is to assist the directors or senior management in ensuring your business and employees comply with FICA and the RMCP in all its activities.
- Staff exercising compliance responsibilities must be qualified, experienced and have the professional and personal qualities to carry out their duties effectively.
Staff members exercising compliance responsibilities must be sufficiently competent to do so. They must have appropriate qualifications, experience and personal qualities. In smaller FSPs, senior management or the directors will be responsible for supporting the staff in discharging their responsibilities so that all relevant business activities comply with FICA and your RMCP. The directors or senior management must also therefore have the necessary competence.
- The directors are responsible and accountable, while the AML/CFT Compliance Officer ensures the effectiveness of the compliance function.
Although the directors or senior management appoint the AML/CFT Compliance Officer to ensure the effectiveness of the compliance function, they are ultimately accountable for compliance with FICA and the RMCP. The AML/CFT Compliance Officer acts as a consultant or advisor to the board and senior management.
The obligations of the Amendment Act should already be fully implemented in your business. To check that accountable institutions have implemented the new policies and procedures, the Financial Intelligence Centre (FIC) and supervisory bodies appointed by the FIC are conducting onsite visits. If an inspection reveals your business is not complying with FICA and its regulations, the consequences can be dire.
It is therefore important to appoint the right AML/CFT Compliance Officer and understand his or her role in monitoring the compliance function as well as the scope of the compliance function in your business. Conveying the right message to staff about the FICA compliance culture in your business is also a must. It is essential that your employees understand their role to ensure they reveal the right compliance culture in your business if probed by the FIC or a supervisory body during a compliance inspection.
By complying with the Amendment Act and implementing a risk-based approach to address money laundering and terrorist financing risks, your business will be able to stand up to the scrutiny of the FIC. For compliance advice or assistance in your business, please contact your nearest Masthead regional office.