Comply with Directive 7 by Friday or face the consequences, says FIC

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Accountable institutions that ignore Directive 7 and fail to submit a risk and compliance return (RCR) by Friday face being sanctioned by the Financial Intelligence Centre (FIC).

The FIC’s “final demand” in respect of Directive 7 follows a similar warning in August to accountable institutions that were required to submit an RCR in terms of Directive 6.

The FIC issued Directive 7 on 31 March, requiring certain accountable institutions listed in Schedule 1 of the Financial Intelligence Centre Act (FICA) to submit the RCR by 31 July.

Directive 7 applies to some of the persons and entities that became accountable institutions in terms of the amendments to Schedule 1, specifically items 11, 14, 20, 21 and 22. This means:

  • credit providers (item 11);
  • South African Postbank Limited (item 14);
  • high-value goods dealers (item 20);
  • South African Mint Company (item 21); and
  • crypto asset service providers (item 22).
  • Click here to read how Schedule 1 defines these accountable institutions.

The RCR for these accountable institutions covers six months, from 1 January to 1 June 2023 (both dates inclusive).

The return requires accountable institutions to submit information to the FIC on their understanding of money laundering, terrorist financing, and proliferation financing risks, as well as an assessment of their compliance with their FICA obligations.

All businesses and professions that became accountable institutions in terms of the amendment of Schedule 1 on 19 December 2022 had until 20 March 2023 to register with the FIC. Accountable institutions that are not registered with the FIC will not be able to submit an RCR.

“Notwithstanding the numerous communiqués, initiatives, and engagements which the FIC has had with accountable institutions, large numbers of affected institutions have elected not to complete and submit timely risk and compliance returns as required by Directive 7,” the FIC said in a notice on 22 November.

The Centre said non-compliance with Directive 7 has a negative impact on the FIC’s effective administration of FICA, “which is a foundational pillar of South Africa’s anti-money laundering and combating of terrorist financing regime”.

The FIC has given accountable institutions that have not submitted their RCRs to do so by 5pm on Friday, 1 December. Non-compliance will result in an administrative sanction.

The administrative sanctions available to the FIC for non-compliance with FICA are:

  • a public reprimand;
  • a remediation directive;
  • the restriction or suspension of certain business activities; and
  • a fine of up to R10 million for a natural person or up to R50m for a legal person.

To complete the RCR, the relevant accountable institutions must populate the form on the FIC’s website using this link.

For more information, click on “Accountable institutions: file your 2023 risk and compliance return today”.

Only accountable institutions that have successfully registered with the FIC on its registration and reporting platform (goAML) and received a FIC organisation identity number (Org ID) may submit an RCR.

Read: An accountable institution must register with the FIC to submit a risk and compliance return

For queries on the RCR submission process, contact the FIC as follows:

We can help with registration and overall FICA compliance

In addition to registering with the FIC, FICA requires all accountable institutions to fulfil the following compliance obligations:

  • Implement a risk-based approach to customer due diligence, including aspects such as ongoing due diligence, enhanced due diligence, screening for domestic and foreign politically exposed persons, and establishing the beneficial ownership in legal structures.
  • Develop a risk management and compliance programme (RMCP).
  • Keep records of customers’ information and transactions.
  • Adhere to the governance obligations as outlined in FICA.
  • Undertake business risk assessments for money laundering, terrorist financing, and proliferation financing.
  • Train employees on how to comply with FICA and the institution’s RMCP.
  • Submit regulatory reports to the FIC relating to suspicious and unusual transactions, cash transactions exceeding the prescribed threshold, property that is linked to sanctioned persons, terrorist activity or terrorist organisations, and electronic cross-border transfers of funds.

At Moonstone Compliance, we have 20 years of experience in providing solutions in respect of FICA, anti-money laundering, counter-terrorist financing, and counter-proliferation financing compliance. We offer solutions ranging from basic toolkits and packaged solutions to developing completely bespoke solutions, depending on the client’s needs.

Click here to read more about Moonstone Compliance’s suite of FICA services or send us an online enquiry.