The Financial Intelligence Centre (FIC) recently issued draft Directive 7 for public comment, which requires specified accountable institutions to submit a risk and compliance return on an annual basis to the FIC. The return will contain information regarding the accountable institution’s understanding of money laundering (ML), terrorist financing (TF) and proliferation financing (PF) risks and its assessment of compliance with obligations in terms of the FIC Act.
Draft Directive 7 is aimed at addressing two key “Immediate Outcomes” identified by the Financial Action Task Force (FATF) as essential for an Anti-Money Laundering, Combating the Financing of Terrorism and Counter Proliferation Financing framework. Firstly, to address Immediate Outcome 1 where the Money Laundering, Terrorism Financing and Proliferation Financing (ML/TF/PF) risks are understood and allow for co-ordinated domestic efforts to combat ML/TF/PF. Secondly in support of Immediate Outcome 3, to allow for supervisors to identify and maintain an understanding of the ML/TF/PF risks in different sectors as a whole, between different sectors and types of institutions. Further, to support the efforts of a risk-sensitive approach to supervising and monitoring accountable institutions’ AML/CFT/CPF requirements.
Who must submit a return?
Draft Directive 7 applies to the following accountable institutions as listed in Schedule 1 of the FIC Act:
- A practitioner who practices as defined in section 1 of the Attorneys Act, 1979 (Act 53 of 1979).
- A board of executors or a trust company or any other person that invests, keeps in safe custody, controls or administers trust property within the meaning of the Trust Property Control Act, 1988 (Act 57 of 1988).
- An estate agent as defined in the Estate Agency Affairs Act, 1976 (Act 112 of 1976).
- A person who carries on the business of making available a gambling activity as contemplated in section 3 of the National Gambling Act, 2004 (Act 7 of 2004) in respect of which a license is required to be issued by the National Gambling Board or a provincial licensing authority.
- A person who carries on the business of lending money against the security of securities.
- The Postbank referred to in section 51 of the Postal Services Act, 1998 (Act 124 of 1998).
- The Ithala Development Finance Corporation Limited.
Who is currently excluded?
The above list of impacted accountable institutions does include the financial industry types of accountable institutions. In its current form, it does not require a risk and compliance return from financial services providers, authorised users of an exchange, collective investments schemes or foreign exchange providers, to name a few.
A look at some of the Proposals
It is proposed that the completion of the risk and compliance return will be compulsory for the specified accountable institutions (as set out above) and that they must answer all questions in the risk and compliance return questionnaire.
In addition, it is proposed that the risk and compliance return will cover the reporting period from 1 April to 31 March of each year, and the return must be submitted annually by 30 June of each year.
The risk and compliance return will be an automated return and the applicable accountable institutions are required to populate the information directly via a link that will be made available on the FIC website. Non-submission of the return will be considered as non-compliance and may result in an administrative sanction.
Consultation
Commentators are invited to comment on the draft Directive 7 and the associated questionnaire by making written submissions using via the following online links only:
The deadline to submit comments on the draft Directive 7 is close of business on 20 December 2022. The FIC intends to conclude the consultation on draft Directive 7, by publishing the final version by 16 January 2023.
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