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, in order to identify, assess, monitor, mitigate and manage the risk of money laundering, terrorist financing and proliferation financing. 

Applying a risk-based approach

Whilst all employees must be subject to scrutiny, not all employees present the same level of Money Laundering (ML) / Terrorist Financing (TF) / Proliferation Financing (PF) risk. An Accountable Institution must determine the level of risk an employee role poses and ensure that the screening applied is proportionate. 

As such, where the Company identifies a higher risk of ML/TF/PF based upon the employee role, the Company should apply more stringent competency and integrity screening and seek to mitigate any identified risk.

The Company asserts to identify and verify employees and collect information and evidence of sufficient quantity and quality to be able to assess the potential level of ML/TF/PF risk presented.

Timing of screening

An Accountable Institution must screen all prospective employees for competence and integrity before their appointment at the Company.
The word “periodically” is used in Directive 8. This indicates that screening of employee information must occur on an ongoing basis.

In application of a risk-based approach to screening of employee information, employee roles presenting a higher ML/TF/PF risk must be screened more frequently than employee roles that are considered to present a medium or lower ML/TF/PF risk.

The FIC recommends that where the employee role poses a heightened ML/TF/PF risk, the Accountable Institution should perform competence and integrity screening of the employee on an annual basis, at a minimum.

As such, employees identified as lower risk, may be screened every 5 years, employees identified as medium risk, may be screened every 3 years and employees identified as higher risk,  should be screened every year. 

Higher risk roles

The FIC considers the following employee roles as presenting a heightened ML/TF/PF risk: 

  • Senior management, including employees who sit within committees that approve the establishment of a Business Relationship or Single Transactions with high-risk Clients such as DPEPs or FPEPs.

  • Any employee that takes decisions which alter the anti-money laundering, counter terrorist financing and counter proliferation financing regime of the institution.

Therefore, persons fulfilling such roles will be subject to more frequent scrutiny.

Screening for Competence

Screening for competence refers to determining whether the employee has the necessary skills, knowledge, and expertise to perform their functions effectively. 

The Company has the flexibility to determine the way it will screen for competence according to its risk-based approach.

A Company could consider the review of:

•    the employee’s previous employment history
•    the employee’s previous employment references
•    the employee’s previous qualifications 
•    the employee’s previous relevant accreditations

Evidence of screening for competence should be kept on the employee personnel files.

Screening for Integrity

The FIC defines ‘Integrity’ as the honesty and moral principles of an employee.

An Accountable Institution could consider:

  • determining whether the employee does not have a criminal record, particularly related to crimes of dishonesty, money laundering or other financial crimes

  •  establishing whether the employee held a senior decision-making role in relation to anti-money laundering, terrorist financing or proliferation financing at an Accountable Institution that was found to have criminally contravened the FICA, the Prevention and Combating of Corrupt Activities Act 12 of 2004 (PRECCA), the POCA or the POCDATARA

  • confirming whether the employee is a high-risk DPEP or FPEP, or known close associate, or immediate family member of such a person

  • establishing whether the employee is a national of a high-risk terrorist financing or proliferation financing geographic area (refer to FIC PCC 54)

Screening against the Targeted Financial Sanctions (TFS) List

The Company must scrutinise all prospective employees against the TFS list before appointment of the person and when updates are made to the TFS list.

This is regardless of the level of risk they may present.

How does DocFox assist with Directive 8 compliance? 

1.  Set up an ‘employee’ Entity type within the system.

This would allow Accountable Institutions to load their employees who can then be subject to:

  • verification of their name, ID and address.

  • screening against the TFS list on an ongoing basis.

  • screening against media.

  • risk rating (e.g. do they hold a higher risk role in the firm, are they a DPEP).

NB: DocFox cannot assist with verification of a criminal record of an applicant in the system as that requires specific permissions and process.