Accountable and Reportable Institutions are subject to inspection to assess their level of compliance with the Financial Intelligence Centre Act (FICA or FIC Act). These inspections are carried out by the Financial Intelligence Centre (FIC) or a supervisory body and result in a written outcome or report confirming their findings.

The report may provide comfort that the accountable or reputational institution is complying, however where weaknesses are identified, the consequences can range from; directive to remediate, to a considerable penalty based on the seriousness of the findings. Any such outcomes are published and so can carry with them considerable reputational damage.

FIC inspector calls

During 2019/20 there were 824 inspections carried out, resulting in the issue of 37 sanction penalties, totalling over R77m.

It is also notable that there was a clear emphasis on Motor dealerships and Estate Agents who received 389 inspections between them, making up 47% of all inspections carried out. Whilst most inspections are arranged in advance, the FIC and supervisory bodies have the right to inspect any accountable or reportable institutions without notice and in most cases without a warrant. They can request immediate access to all files, use all systems and remove/copy any documents or files as deemed necessary. Attempting to interfere with the duty of an Inspector is an offence.

Examples of penalties issued by the FIC during 2019/2020 included; For non-bank firms, penalties ranged from R10k for a small financial advisor who failed to implement a risk management and compliance plan (RMCP) to R2.7m for a vehicle dealership who failed to update their registered details and failed to report cash transactions.

There is an adjudication process for any enforcement action that a firm feels is not fair or representative, but any fine can have serious consequences on the operation and survival of firms, so it’s vital that FICA is taken seriously and that awareness, systems and controls are put in place to minimise the potential for any adverse findings. It is important to remember that the FIC has been tasked with ensuring that compliance is enforced in order to fight for the common goal of ending money laundering. Having an effective Risk Management Compliance Program in place could actually streamline many processes in your business as well as protect you and your business from bad actors.

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