On 12 September 2014, the FIC issued Directive 3/2014, which is a notification of failure to report according to the Financial Intelligent Centre Act, No 38 of 2001 (FIC Act). This Act was established with the principal objective of assisting in the identification of proceeds of unlawful activities and combating money laundry activities and the financing of terrorist and related activities (section 3(1) of the Act).
Among other regulations the Act obliges “accountable institutions” such as legal practitioners, boards of executors/trust companies, estate agents, managers, mutual banks, people carrying business on long-term insurance, available gambling activities, or handling foreign exchange and all others listed in schedule 1 of the Act, and also “clients or consumers” entering into business relationships or transactions with accountable institutions, to identify and verify new and existing clients and also to keep records of identities of clients and transactions entered into with clients. The FIC obtains the information in the form of the following reports filed with it: section 28 (cash threshold), section 28A (terrorist property reporting) and section 29 (suspicious and unusual transaction reporting).
It has been noted by the FIC that some accountable institutions are in breach of section 29 (3) of the FIC Act, which provides that: all persons who have made or must make a report may not disclose that fact or any information regarding the contents of any such report to any other person. In terms of section 53 of the Act: “Any person who fails, within the prescribed period, to report to the Centre the prescribed information in respect of a suspicious or unusual transaction or series of transactions or enquiry in accordance with section 29(1) or (2), is guilty of an offence. Such offences may carry imprisonment up to 15 years or fines up to R100 million.”
Directive 3/2014 provides clarity on procedures to be followed when a person or institution becomes aware of a reporting failure to the FIC. It provides that when a person becomes aware of such a reporting failure, such a person or institution has to mitigate the loss of intelligence data to the Centre in the following manner:
Inform the Centre in writing of the reporting failure immediately after becoming aware of such failure. The notification must be sent to the Executive Manager, Compliance and Prevention, Financial Intelligence Centre; and
Request an engagement with the Centre to discuss relevant mitigation factors.
The subsequent arrangements for the mitigation of lost intelligence due to the Centre do not imply condonation of the failure to report information to the Centre, nor does it absolve the reporter from its continuing reporting obligations under the FIC Act or prevent enforcement action from being taken by the relevant supervisory body.
Where an institution/person fails to submit these reports to FIC, intelligent data needed to assist in the identification of the proceeds of crime is lost.
Bibliography
- Financial Intelligent Centre Act, No 38 of 2001 (as amended)
- Directive 03/2014 Notification of Failure to Report As Required by The Financial Intelligent Centre in terms of The Financial Intelligent Centre Act, Act No 38 of 2001: Notice 783 of 2014
