On the 17th of June 2021 the Legal Practice Council (LPC) issued an advisory to all legal practitioners in South Africa.

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The advisory detailed a report they had received from the Financial Intelligence Centre (FIC) highlighting extensive and serious regulatory failures across the industry in terms of compliance with the Financial Intelligence Centre Act (FICA).

FICA seeks to mitigate the risk of money laundering and the financing of terrorism and related activities by requiring Accountable Institutions to fulfil various FICA obligations. The FIC identified that approximately 80% of all law firms were found to be non-compliant with the FIC Act during inspections over the past year.

Dealing with sizable financial transactions every day, attorneys, notaries,and conveyancers play a significant role in South Africa's economy. Adding to this, the broad range of services legal professionals offer, such as the creation of companies and trusts as well as facilitating property purchases and sales, can make them even more vulnerable to misconduct.

 

FICA non-compliance

As Accountable Institutions, legal practitioners are obligate to register with the FIC and fulfil various FIC Act obligations, however, of the 207 inspections that took place, the most common non-compliance related to:

  • Failure to register with the FIC.

  • Failure to have a risk management and compliance programme (RMCP) in place.

  • Failure to conduct customer due diligence.

  • Failure to report suspicious activities and transactions.

 
FICA non-compliance

Consequences of FICA Non-Compliance

Failure to comply with FICA could lead to potentially severe consequences, under Section 45C(3) of the FIC Act which may impose one or more of the following administrative sanctions:

  • A caution not to repeat the conduct which led to the non-compliance reprimand.

  • A directive to take remedial action or to make specific arrangements.

  • The restriction or suspension of certain specified business activities.

  • Financial penalties not exceeding R10 million in respect of natural persons and R50 million in respect of any legal person.

The LPC also advised its members to ensure, as a matter of urgency, that they are aware of all their obligations under the FIC Act, and that they become compliant before any further inspections are conducted. They further noted that, in addition to sanctions from the FIC, should Legal Practitioners fail to comply with FICA, they could potentially also face disciplinary charges for breaching the Councils’ Code Of Conduct in terms of section 18.17.

Did you know?

The FIC has published public compliance communication (PCC) 47 and guidance notes 4B and 6A which provide further direction to attorneys, notaries and conveyancers on their compliance obligations in terms of the FIC Act. All the PCCs and guidance notes are available on the FIC website.

How can DocFox help you?

If you are struggling to figure out where you need to start, or need to become FICA compliant fast, you have come to the right place. Our end-to-end software ensures that your firm’s FICA policies are implemented right the first time. DocFox addresses all FICA requirements by:

 

  • Providing you with an expertly crafted and tested RMCP template that addresses key FICA requirements along with a supporting step-by-step guide on how to implement it in your firm. DocFox can also be configured according to your existing RMCP and internal business rules, no matter how big or small your firm.

  • Ensuring ongoing customer due diligence with consistent risk rating, that is guided by your RMCP. As well as continuous daily monitoring of your clients against Anti-Money Laundering (AML) watchlists and adverse media news to ensure the results you get are up to date.

  • Enabling you to seamlessly collect enhanced due diligence documents, such as a source-of-funds, for high risk clients.

  • Other DocFox features include seamless FICA document collection and analysis, automated client review reminders so you never miss a review date and bank account verification to round off your firm’s due diligence.

In addition to our gold standard software, our compliance experts can offer guidance around registering with the FIC, help you prepare for a FIC inspection or product provider review, respond to reports, or assist with preparation of Suspicious Activity or Transaction Reports (SARs / STRs).

DocFox makes FICA simple and efficient, and gives you peace of mind to confidently face an inspection, anytime. Don’t take our word for it, put us to the test by requesting a live demo here.

 

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