Greylisting: firms face fines of up to R50m

New measures to combat money laundering and the financing of terrorist activity have resulted in a tenfold increase in the number of institutions accountable to the FIC

Banks, realtors and casinos are among the companies that will have to screen employees for competence and integrity or face fines of as much as R50m This is according to the Financial Intelligence Centre (FIC), which recently published a directive in the government gazette ordering companies in these and other sectors to screen current and prospective employees’ track records to curb financial crime.

“The purpose of this directive 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.”

The gazette notice added that failure to comply could result in the FIC issuing a caution, a reprimand, remedial action, suspension of specified business activities, or a financial penalty of up to R10m for individuals and R50m for institutions. The FIC directive comes amid a raft of interventions from the centre and the government to respond to the Financial Action Task Force’s decision to add South Africa to its greylist.

New measures to combat money laundering and the financing of terrorist activity have resulted in a tenfold increase in the number of institutions accountable to the FIC, adding legal practitioners, dealers in precious stones and metals as well as cryptocurrency trading platforms — all of whom must account to the watchdog regularly. These entities, which also include trust and company service providers, investment managers, life insurers, foreign exchange providers and high-value goods dealers, must now conduct compulsory screening of staff to guard against money laundering, terror financing and proliferation — the sale, storage, trade or facilitation of chemical weapons.

Other institutions included in this directive are the South African Mint Company, the South African Post Bank and Ithala Development Finance Corporation, the FIC said. Approached for comment, the FIC said the screening exists to establish whether employees have the necessary skills, knowledge and expertise to perform their functions effectively.

“The accountable institution has the flexibility to determine the manner in which the accountable institution will screen for competence according to its risk-based approach.”

The FIC said this screening process gave the institution power to consider reviewing the employee’s previous employment history, employment references, qualifications and relevant accreditations.

“Screening for integrity relates to the honesty and moral principles of an employee. Screening for integrity may include determining whether the employee has a criminal record, particularly related to crimes of dishonesty, money laundering or other financial crimes,” – the FIC said.

The watchdog said an accountable institution must scrutinise all prospective employees against the targeted financial sanctions list before hiring them. The directive became effective and enforceable from the date of publication. The notice in the gazette added that institutions must record how competence and integrity screening is conducted, keep a record of the screening outcomes, and scrutinise employee information against targeted financial sanctions lists. Banks said they are obliged to comply with all applicable legislation and regulations.

Absa said it had:

“participated through the Banking Association of South Africa in submitting comments to the Financial Intelligence Centre during the consultation phase of the directive. Absa recognises the need to ensure its employees are competent and act with integrity and has implemented applicable processes and policies to ensure this.”

Thato Ramaili, CEO of the Property Practitioners Regulatory Authority (PPRA), said the authority adopted a “two-pronged approach” to assist members in offsetting the immediate consequences of greylisting and the gazetted requirements.

“The PPRA, as the supervisory body, intends embarking on an education drive to firstly remind property practitioners of their responsibilities to comply with anti-money laundering as they are susceptible to be used as channels to launder money … perpetrators might want to launder money by depositing the proceeds of unlawful activities into either their business accounts or trust accounts,” – said Ramaili.

She said the PPRA would also help educate property practitioners on how the directive affects them and what measures they should put in place to curb deficiencies in controls. This approach was aimed at the regulatory authority first clarifying its expectations from property practitioners before enforcing any sanctions for noncompliance, she said. The Banking Association and the National Gambling Board did not respond to requests for comment.


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