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Regulatory Focus on FICA

The Financial Sector Conduct Authority (FSCA) has just published a general communication to Accountable Institutions (AIs) on its supervisory approach to implementation of the Amendments to the Financial Intelligence Centre Act, 2001 (FICA).

This publication confirms the FSCA’s commitment to assist Accountable Institutions with implementation of the required systems, procedures and controls envisaged in the original Roadmap.

A recent survey, as reported on Thursday, noted that many qualifying FSPs failed to register with the FIC. Although the survey was conducted mainly amongst small FSPs without a compliance officer, there can be little doubt that many others also did not register.

FAIS Newsletter 25 of 4 December 2017 contained extensive details of the amendments, and the Regulator’s expectations in respect of FSPs in implementing it. We provide a link below to this newsletter.

Commencement of the Amended FIC Act

The first provisions kicked in on 13 June 2017 and mainly concerned setting the table for the practical aspects, which commenced on 2 October 2017. These provisions required changes to Money Laundering and Terrorist Financing (ML/TF) Control Regulations and withdrawal of Exemptions, as well as training of staff and major changes to processes and systems used by accountable institutions.

Risk-based approach

Previously, accountable institutions relied on Exemptions and other information that was prescribed in the ML/TF Control Regulations. The Exemptions have been withdrawn and the ML/TF Control Regulations have been amended to make way for a risk-based approach.

A risk-based approach assumes that accountable institutions are best placed to know their products and services, clients, operating structure and business environment. It also assumes that accountable institutions are best placed to assess the risk that their business may be used for ML/TF purposes.

The amendments provide accountable institutions with the flexibility to use a range of mechanisms towards implementation of the FIC Act and encourage them to explore innovative ways of offering financial services to their broader client base.

FAIS Newsletter 25 contains a summary of the 18 new provisions affecting FSPs which became effective on 2 October 2017.

FSCA Regulatory Focus

The latest communication from the FSCA notes the following:

  1. The FSCA will continue to use onsite inspections and other oversight activities to guide and advise Accountable Institutions on implementation of the new requirements of FICA.
  2. Accountable Institutions are expected to demonstrate progress towards the implementation of the new requirements in terms of the FIC Act.
  3. In order to ensure appropriate traction during the implementation period, the FSCA will request Accountable Institutions to respond to surveys and/or to submit implementation plans highlighting progress towards the implementation of the new requirements in terms of the FIC Act. The respective Supervision Departments within the FSCA will engage with Accountable Institutions in due course regarding this.

In instances where implementation plans are to be submitted, Accountable Institutions will be required to indicate the key milestones that need to be achieved for successful implementation. It will be required that milestone dates be set starting from June 2018, indicating which provisions of the amendments to the FIC Act will be implemented by which milestone date. This implementation process will be closely monitored and the respective Supervision Departments within the FSCA will engage with Accountable Institutions in due course regarding this as well as the manner and date by which to provide the required implementation plans and the expected reporting intervals in respect thereof.

“The FSCA understands the challenges in achieving the above and more importantly that time is required to fully implement the new requirements. For this reason, Accountable Institutions are afforded until 2 April 2019 to fully implement the new requirements of the FIC Act as amended. Despite various communications from registrars of different sectoral laws on different implementation dates we have agreed with the Prudential Authority to coordinate to a single date. Any previous dates communicated may be disregarded”.

Click here to download FAIS Circular 25 of 2017.

FICA will form an important part of the Moonstone Compliance and Risk Management Regulatory update workshops which are scheduled for June to coincide with the first CPD cycle.

Please also bear in mind that we are already assisting the industry to conform to the training requirements through the provision of an online FICA training platform.

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