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Joint Communication 2 and 2A of 2020 – Further clarity for AIs on submission of their required action plan

Joint Communication 2 issued on 21 April 2020 sets out the Financial Sector Conduct Authority (FSCA), South African Reserve Bank, Prudential Authority (PA) and Financial Intelligence Centre (Authorities) position concerning the COVID-19 pandemic and its impact on the ability of Accountable Institutions (AIs) to adhere to their obligations regarding customer due diligence (CDD), particularly that of conducting on-going due diligence, in terms of section 21C of the Financial Intelligence Centre Act, 2001 as amended (FIC Act).

Joint Communication 2A, issued on 6 May 2020 was issued by the Authorities to provide a revised, as well as updated, time frame to certain dates stipulated in the prior communication.

As a supervisory body, the FSCA is tasked with ensuring compliance with the provisions of the FIC Act and may institute enforcement actions where an AI is not complying with its implemented Risk Management and Compliance Programs (RMCP). The submission of the plan, as required in the Joint Communications, will confirm that the AI has a process in place in dealing with clients outside of what is required in terms of their respective RMCPs. AIs will therefore not be ignoring their RMCPs, but rather have developed a plan as to how to deal with clients that are now being affected by the current situation.

This action plan will provide the AI with a valid excuse or defence when the FSCA approaches them regarding their non-compliance with their own RMCP. It will further confirm and assist the FSCA to understand that the process to deal with clients outside the RMCP, is not unreasonably delayed and does have a set end date.

Where the AI is unable to conduct face-to-face identification and verification in terms of their action plan, they will be required to freeze the assets of the client. Should this still not have the desired effect, AIs will be expected to exit the relationship in line with section 21E of the FIC Act.

The FSCA has indicated that they are aware of the uncertainty relating the movement of the different levels of lockdown, as well as questions regarding how an action plan will be affected as a result of these changes. For the time being it is suggested by the FSCA that everyone should be working on the assumption that all provinces will be moving to level 3 by the end of May 2020. Should this not happen, institutions will be allowed to submit revised plans.

AIs must ensure that where applicable their action plan is submitted to the responsible analyst in the Conduct of Business Division by no later than seven (7) days post the Level 3 lockdown period.

Further announcements and communication relating to this plan will be monitored as the situation unfolds.

Should you require any further assistance relating to any FICA related matter, please contact our compliance department on the following details, for further assistance: info@moonstonecompliance.co.za.

Click here to download Joint Communication 2.

Click here to download Joint Communication 2A.

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