“According to FICAA, AIs must follow a RBA when managing risks related to ML and TF”… we understand that getting to know and understand the Financial Intelligence Centre Amendment Act (FICAA) may sometimes feel like decoding a Gen Z text message. In the below we hope to clear up some of the abbreviations and terms to enable you to better understand and implement the Act.
Financial Intelligence Centre (FIC)
FICA gives the FIC supervisory authority over Accountable Institutions (AI) in South Africa. Under that authority, the FIC monitors South Africa’s AIs, conducting periodic audits to ensure ongoing compliance with FICA and issuing penalties and sanctions for those who do not comply with the FIC Act.
Money Laundering (ML)
According to the FIC “Money Laundering is the process used by criminals to hide, conceal or disguise the nature, source, location, disposition or movement of the proceeds of unlawful activities or any interest which anyone has in such proceeds.” This includes the act of conducting or causing to conduct transactions with the intention of avoiding the duty to report such transactions.
Anti-Money Laundering or (AML)
This refers to the fight against money laundering and can include many processes and steps that get taken to attempt to prevent money laundering from occurring.
What is an Accountable Institution (AI)?
According to Schedule 1 of the Financial Intelligence Centre Act, the term “accountable institution” is described as a person or organisation that carries out specific types of business. Amongst those listed include attorneys, trustees and executors, estate agents, wealth managers and stock brokers – you can find a full list here.
Know Your Customer (KYC)
KYC is the practice carried out by institutions to identify and verify their clients. The idea is that clients prove that they are who they say they are. For individuals this proof is often presented by means of an ID book and proof of residence.
Risk Management and Compliance Programme (RMCP)
The requirement to implement a RMCP (section 42 of the FIC Act) came into effect on 2 October 2017. The RMCP should be established by AI’s as guidelines and procedures that will ensure full compliance with the FIC Act. The RMCP should include identifying, measuring, continuous monitoring, managing and reporting of risks.
Risk-based Approach (RBA)
According to the FATF “a risk-based approach means understanding the money laundering and terrorist financing risk to which you are exposed, and taking the appropriate mitigation measures in accordance with the level of risk”. In other words a RBA means you develop an approach and strategy that will help you identify potential high risk money laundering clients as well as define how to mitigate them.
Customer Due Diligence (CDD) / Enhanced Due Diligence (EDD) / Continuous Due Diligence
Customer due diligence includes doing identification and verification checks on your customers to assess their risk, prior to onboarding them. Enhanced due diligence often involves a greater level of inspection once a client has been identified as higher risk. The difference between CDD and EDD then is that CDD is a less strict verification procedure. Continuous due diligence / monitoring refers to the continuous monitoring that should be performed throughout the course of the relationship with the client. You can read more about identifying high risk individuals in our blog post here.
Ultimate Beneficial Owner (UBO)
“In addition to establishing and verifying a legal person’s identity an accountable institution also must establish the nature of the legal person’s business and its ownership and control structure. Furthermore, an accountable institution must also establish who the beneficial owner of the legal person is and take reasonable steps to verify the beneficial owner’s identity” – The FIC .
At DocFox we understand that traditional approaches to fighting against money laundering can be time-consuming and costly, diverting your company focus from core services and often frustrating customers. We aim to eliminate the complexity and manual processes so that you can focus on the core of what your business does. We know that each business is unique and so we offer tailor made solutions for all our customers. Chat to us to today to see how we can make your compliance team smile again!