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Cost of FICA amendment on Compliance

Legalbrief Today reported as follows on an article in Business Day:

Institutions have cited the prospect of a spike in the cost of compliance as a major issue that might arise from proposed amendments to the Financial Intelligence Centre Act, says a Business Day report.

The draft amendments, published this year for public comment, aim to introduce a risk-based approach to client verification and monitoring. This will mean the level of due diligence applied will depend on the risk attached by the institution to a customer. It will require accountable institutions to pay special attention to people in influential public positions, particularly in foreign countries, who might be involved in corruption and money laundering, for example.

To tackle the compliance burden, the Treasury was considering the establishment of a central database of documentation for customer verification. Treasury’s Olano Makhubela said the risk-based approach would reduce the compliance burden, although the banking expert said the draft amendments were too prescriptive and did not allow for flexibility.

However, Deloitte’s Jan Peyper said the amendments would require financial institutions to change their methodology of assessing and verifying clients and of monitoring their transactions.

Association of Savings and Investments (ASISA) senior policy adviser, Anna Rosenberg, hoped the risk-based approach would allow institutions to direct resources where they were needed most. Implementing it would, however, require changes to IT systems, processes and procedures, and require highly skilled people able to exercise discretion. All this would increase the cost of compliance.

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