2023 Round-Up: A Summary of Greylisting, New FICA Directives & Amendments

2023 has been a year filled with changes to the FIC Act, updates within the financial crime and compliance landscape, and many more. However, it all came down to the “G” word, otherwise known as Greylisting, which formed the basis for the proactive amendments before South Africa’s greylisting designation and informed the reactive responses post greylisting. 

Greylisting

South Africa was designated as greylisted in February 2023 by the international money laundering and terrorist financing watchdog, the Financial Action Task Force (FATF). The FATF leads global action to tackle money laundering, terrorist and proliferation financing. The 38-member body sets international standards to ensure national authorities can effectively go after illicit funds linked to drug trafficking, the illicit arms trade, cyber fraud and other serious crimes. According to the Mutual Evaluation Report issued by the FATF in October 2021, South Africa fell short of the internationally recognised standards of due diligence required by the FATF. South Africa is expected to address eight areas of strategic deficiencies identified by the FATF, by no later than the end of January 2025.

Cash Threshold Amendments

The first considerable change took place on 14 November 2022 regarding amendments to Cash Threshold Reporting. Cash Threshold Reporting is required to be undertaken by Accountable Institutions listed in Schedule 1 of FICA. The reasoning behind the importance of reporting cash transactions is that, as a medium of exchange, it is highly favoured by money launderers due to its inherent un-traceability, the efficiency of use, difficulty in identifying its true source and its ability to convert its illicit origins into a legitimate asset like a vehicle or a property.

The primary amendments were as follows:

• The monetary threshold was increased for cash reporting from deposits or transfers of R24 999 and above to R49 999 and above as a single transaction only. This is in relation to physical coins and paper money received or transferred.
• The reporting period deadline was extended from 2 to 3 business days from the time of becoming aware of the cash transaction.
• Submitting Cash Threshold Report Aggregations (CTRA) has been repealed and is no longer in force, which was where a report was made to the FIC that details a combination of multiple cash transactions exceeding the then prescribed amount of R24 999 in a particular period rather than a single, lump sum cash transaction. 

New Accountable Institutions

Towards the end of 2022 the Government Gazette published changes to Schedules 1,2 and 3 of the FIC Act. The amendments aimed to close gaps in anti-money laundering (AML) and counter financing of terrorist (CFT) coverage in South Africa by expanding the reach of the FIC Act. Whilst it significantly increased the number of people and firms identified as Accountable Institutions who are now subject to its full requirements, it does provide the Financial Intelligence Centre with additional valuable intelligence across a broader range of financial and non-financial industries at risk of being leveraged by those with criminal intent.

The General Laws Amendment Act

• FICA
• The Trust Property Control Act
• The Nonprofit Organisations Act
• The Companies Act (CA)
• The Financial Sector Regulation Act

As part of this, some important definitions have been amended and new acronyms created in terms of the Act. Domestic Prominent Influential Persons (DPIPs) and Foreign Prominent Public Officials (FPPOs) have been replaced with the acronyms Domestic Politically Exposed Persons (DPEPs) and Foreign Politically Exposed Persons (FPEPs), respectively. 

You can read more about the other recent important FICA amendments here. 

Latest FIC Directives 6, 7 & 8

There were not only amendments to FICA before SA’s greylisting but also some recent Directives issued by the FIC after the greylisting announcement. The FIC announced on 31 March 2023 that it had issued Directive 6 and Directive 7 through publication in the Government Gazette, whilst Directive 8 was also published on 31 March 2023. 

Directive 6 & 7 

Directives 6 and 7 require certain Accountable Institutions to submit information to the FIC via an online questionnaire on an annual basis regarding their understanding of money laundering, terrorist and proliferation financing risks and their assessment of compliance with obligations in terms of the FIC Act to the FIC through a risk and compliance return. The completion of this return is compulsory for all identified Accountable Institutions specified in Directives 6 & 7 and non-submission of the return will be considered non-compliance and may result in an administrative sanction. 

Directive 8

The purpose of Directive 8 is to require Accountable Institutions to screen prospective employees and current employees for competence and integrity, as well as to scrutinise employee information against the Targeted Financial Sanctions lists. Whilst all employees must be subject to scrutiny, not all employees present the same level of Money Laundering, Terrorist and Proliferation Financing risk. An Accountable Institution must determine the level of risk an employee role poses and ensure that the screening applied is proportionate.

CIPC Beneficial Ownership Register 

In keeping with addressing deficiencies outlined by the FATF and its consequential greylisting of South Africa, the CIPC has been mandated in terms of the General Laws Amendment Act, the Companies Act and its Regulations to establish a register of Beneficial Owners (BOs) for all entity types registered in terms of the Companies Act and the Close Corporations Acts, as amended. These amendments to the Companies Act came into effect on 1 April 2023 and companies had six months from this date to comply with the requirements, being 1 October 2023. There is therefore an obligation for all CIPC registered companies affected by the amendment as per the CIPC’s advice, to declare and register all BOs.

The submission of beneficial ownership information must be done as and when the information changes or at least once annually on the CIPC e-services platform. Anyone can file this information on behalf of a juristic entity provided there is a written mandate that authorises the filer and the written mandate must be filed as part of the compulsory supporting documents. Non-compliance will be investigated and compliance enforced by the CIPC, which have also been mandated by the General Laws Amendment Act to impose financial fines and sanctions against directors and relevant persons for non-adherence, amongst other actions. The BO registry/repository will be made available upon vetting of requests, to verified law enforcement agencies (LEAs), regulatory bodies and CIPC accredited authorities. 

This is a massive step towards getting South Africa off the FATF grey list as well as proactively identifying and connecting juristic entities, associated financial assets and illicit flows to the respective beneficial individuals. The centralised registry and the intended partnership of its information between the CIPC, FIC and LEAs promise notable successes in the fight against money laundering, terrorist and proliferation financing.

For South Africa to be removed from the greylist in quick succession like Mauritius did in just two years, a collaborative and determined effort from multiple stakeholders are essential. In addition to government, law enforcement agencies and the FIC themselves, Accountable Institutions can play a supporting role in actively complying with the mandates of FICA and significantly contributing to remedying the recommendations set out by the FATF.

Learn more about how DocFox can help you become FULLY FICA compliant.