The world is full of acronyms, but if you are an Accountable Institution then FICA is one you need to become accustomed to. While you may have heard about it, do you know what it is, and why it is important?
As with many laws, most people don’t take them seriously until an inspector comes knocking on your door. However, the difference with the FIC Amendment Act (FICAA) is that it was created not only to prevent financial crime, but following the guidance set out within the Act could also help protect your reputation, enhance your client onboarding, reduce your risk and ultimately improve the type of clients you attract.
The Financial Intelligence Act (FICA)
The Financial Intelligence Act (FICA) came into effect in July 2003 along with the establishment of the Financial Intelligence Centre (FIC) who are essentially responsible for overseeing compliance with the Act.
The act is aimed at combating financial crimes such as money laundering, tax evasion and terrorist financing. According to the FIC Act, the responsibility as an Accountable Institution includes identifying and verifying your clients and ensuring that their information is correct and up to date.
Since its introduction in 2003, FICA has been amended and has become known as the Financial Intelligence Centre Amendment Act 1 of 2017 (FICAA). The Amendment Act brings South Africa closer to international anti-money laundering standards and the best practices recommended by the Financial Action Task Force (FATF). During the State of the nation 2021 address, in an attempt to further enhance the countries fight against corruption and financial crime, President Cyril Ramaphosa went further and announced the formation of the National Anti-Corruption Advisory Council, you can read more about this here.
Why is FICA important?
As a member of the FATF, South Africa has agreed to play a role in the international fight against money laundering and terrorist financing. FICA is South Africa’s local legislation to achieve this.
FICA complements other South African legislation such as the Prevention of Organised Crime Act (POCA), the Protection of Constitutional Democracy Against Terrorism Related Activities Act (POCDATARA), and the Prevention and Combating of Corrupt Activities Act (PRECCA).
Together these legislations introduce measures to combat and prosecute crimes such as organised gangs, racketeering, terrorist-related activities and money laundering.
Since the establishment of the Financial Intelligence Centre (FIC) and the onset of FICA, impressive strides have been made to combat money laundering and other financial crimes in South Africa.
In partnership with law enforcement, intelligence services and other supervisory bodies, the FIC has assisted in many financial crime investigations, including bringing an estimated R12 billion* Ponzi scheme to a halt, exposing an import/export ring and exposing a case of theft and money laundering to the value of about R21 million.
Read the full stories & more impressive FICA case studies here.
Based on these and other findings it is clear to see that the processes and legislation enforced by the FIC do work and have a positive impact of working towards ending financial crime and protecting innocent businesses from unknowingly facilitating crimes.
*The estimated value for the South African leg of the scheme.
What does this mean for you?
FICA requires Accountable Institutions to develop and implement a Risk Management and Compliance Programme (RMCP) that documents the risk-based approach of the institution’s FICA compliance strategy.
- Customer Due Diligence (CDD) processes that identify and verify clients, their related parties and ultimate beneficial owners (UBO).
- Processes to identify whether clients are domestic prominent influential persons (DPIP) or foreign prominent public officials (FPPO). (As of 29 December 2022, 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). Read more here.)
- Screening against sanctions watchlist.
- Record keeping and reporting obligations.
Accountable Institutions that fail to comply with their FICA obligations may open themselves up to a range of consequences, including a requirement to remedy any identified weaknesses in their controls, administrative sanctions, sizable fines or even prison sentences.
How do we make FICA simple and seamless?
To ensure compliance, systems like DocFox ensure that your compliance process is hassle-free and automated.
DocFox automatically assists with:
- Remote, digital and automated document collection and analysis so that you don’t have to spend hours chasing and checking documents but can be assured that you don’t onboard fraudsters.
- A configured risk rating that is unique to your business needs and ensures a consistent risk assessment among clients as well as enhanced due diligence to help you identify high-risk clients.
- Automated Client Reviews so that you never miss a review date.
- Daily anti-money laundering watchlist screenings and adverse media screenings to help you determine your clients’ risk profile and identify possible ongoing threats.
We understand that compliance needs vary greatly depending on your industry which is why DocFox can be configured according to your rules no matter what industry you are in. Don’t take our word for it, see for yourself.
