The provisions of the Financial Intelligence Centre Act No. 38 of 2001, as amended (“FICA“), go beyond being a mere “add-on” to existing business procedures. To ensure effective compliance, businesses must develop well-defined documented processes and procedures that align with a risk-based approach. There is a particular burden placed on “accountable institutions” and according to FICA, an “accountable institution” encompasses various entities as defined in Schedule 1 thereof. The entities falling within this definition include, amongst others, credit providers, bankers, stockbrokers, businesses engaged in foreign exchange transactions, and those exchanging in or safekeeping crypto assets.

Compliance Requirements:

For businesses, achieving and maintaining FICA compliance is of utmost importance and should be seamlessly integrated into their company’s strategy and day-to-day operations. Failure to comply with the FICA regulations can result in severe consequences. Therefore, businesses should prioritise establishing robust compliance measures to mitigate the risks associated with non-compliance.

The penalties for non-compliance with FICA vary depending on the severity of the offense and these penalties not only apply to the company itself, but may also be levied against executives, owners, employees or individuals involved in dealings with a specific client, transaction or activity.

FICA prescribes that non-compliance could result in:

Public Reprimand:

a formal censure or admonishment by the regulatory authorities, which can have a detrimental impact on a company’s reputation.

Remediation Directive:

a directive from the Financial Intelligence Centre to rectify any deficiencies in compliance, which may require costly and time-consuming remedial actions.

Restriction or Suspension of Business Activities:

the Financial Intelligence Centre may impose restrictions or suspend certain business activities of non-compliant entities, which can result in disruptions to operations and financial loss.

Financial Penalty:

a significant financial penalty of up to ZAR10 million for natural persons and up to ZAR50 million for legal persons can be imposed for non-compliance with FICA. For more serious offenses, the maximum penalty increases to imprisonment for up to 15 years or a fine of up to ZAR100 million.

In the Financial Intelligence Centre’s 2019/2020 report, it was revealed that a total of 37 sanctions were issued by the Financial Intelligence Centre and supervisory bodies, with a cumulative financial penalty of R77 376 738.67. The most common areas of non-compliance include failure to register with the Financial Intelligence Centre, failure to have a Risk Management and Compliance Programme, failure to conduct Customer Due Diligence, and failure to report.

Concluding remarks:

To ensure businesses are FICA compliant and determine their level of compliance, conducting a compliance audit is highly recommended. The compliance audit offers valuable benefits by assessing whether companies have established appropriate policies and procedures to identify and verify clients, maintain accurate record-keeping, and effectively report suspicious transactions. Additionally, the audit facilitates the implementation of regular risk assessments, enabling businesses to identify potential areas of non-compliance and take corrective action.

Fulfilling FICA requirements is essential to ensure compliance and avoid the potentially severe consequences of non-compliance. Doing so will provide peace of mind to businesses and enable them to confidently face Financial Intelligence Centre inspections. Avoiding non-compliance is not only critical for avoiding penalties, but also for safeguarding your business reputation and maintaining the trust of your stakeholders.

VDMA’s team of experts is available to provide assistance with FICA compliance audits, offering invaluable support in navigating the audit process and ensuring a comprehensive review of the company’s compliance program.

Published 23 May 2023