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financial intelligence centre REPUBLIC OF SOUTH AFRICA . PRESENTATION PORTFOLIO COMMITTEE ON FINANCE BACKGROUND TO ANTI-MONEY LAUNDERING & COMBATING OF FINANCING OF TERRORISM SYSTEM IN SA AND THE IMPLEMENTATION OF THE FIC ACT 2 AUGUST 2007. financial intelligence centre

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financial intelligence centre

REPUBLIC OF SOUTH AFRICA

PRESENTATION

PORTFOLIO COMMITTEE ON FINANCE

BACKGROUND TO

ANTI-MONEY LAUNDERING & COMBATING OF FINANCING OF TERRORISM SYSTEM IN SA AND THE IMPLEMENTATION OF THE FIC ACT

2 AUGUST 2007


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financial intelligence centre

REPUBLIC OF SOUTH AFRICA

PRESENTATION

1. Context of South Africa’s anti-money laundering and combating of financing of terrorism system

2. Relationships and responsibilities

3. The Financial Intelligence Centre

4. Challenges ahead


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financial intelligence centre

REPUBLIC OF SOUTH AFRICA

ELEMENTS IN SA’s AML/ CFT SYSTEM

The system incorporates the following elements:

  • Criminalisation: of money laundering and financing of terrorism.

  • Administrative preventative measures: to be taken by financial institutions and non-financial businesses and professions – reporting requirements (eg suspicious transactions, Cash threshold, terror finance); customer due diligence/ Know Your Customer; record keeping; staff training; appointment of compliance officer; sanctions for non-compliance.

  • Law enforcement: legal capacity to investigate and prosecute and other measures; availability of resources.

  • Supervision: Supervisory bodies to monitor and ensure compliance enforcement.

  • Financial Intelligence Centre to receive data, analyse and refer to law enforcement. Function independently. Resources.

  • International cooperation: mutual legal assistance, extradition, and information sharing.


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financial intelligence centre

REPUBLIC OF SOUTH AFRICA

SA EXPERIENCE IN AML/ CFT AND THE FINANCIAL INTELLIGENCE CENTRE ACT

The FIC Act (Act No. 38 of 2001)

  • Helps create an anti-money laundering environment in South Africa to:

    • Maintain and protect the integrity of financial sector;

    • Identify proceeds of unlawful activities and combat money laundering activities (and since 2005, combating terrorist financing);

    • Build a partnership between the private and public sectors.

  • Complements the Prevention of Organised Crime Act (POCA), 1998 which defines the crime of money laundering and anti-terror legislation (POCDATARA, 2005);


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financial intelligence centre

REPUBLIC OF SOUTH AFRICA

SA EXPERIENCE IN AML/ CFT:FINANCIAL INTELLIGENCE CENTRE ACT

  • Imposes ‘know your customer’ and other obligations on wide range of accountable institutions

    • Client identification and verification;

    • Record keeping;

    • Reporting transactions and sharing information;

    • Measures to promote compliance.

  • Imposes obligations on supervisory bodies and give law enforcement further responsibilities

  • Creates the Financial Intelligence Centre


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financial intelligence centre

REPUBLIC OF SOUTH AFRICA

1998: Money laundering offences and asset forfeiture provisions updated and incorporated in POCA

2003: FIC starts functioning in operational format – receiving STRs

2004: SA criminalises terrorist financing in POCDATARA Act

2002: FIC established – starts preparation for receipt of reports

2001: FIC Act passed based on model of SALC recommendations

2000: Formation of the AFU to implement parts of POCA

  • 1996:

  • SA criminalises money laundering and introduces asset forfeiture provisions in Proceeds of Crime Act

  • SALRC proposes draft legislation creating FIC and imposing obligations similar to FATF 40Rs

  • 2003:

  • SA becomes member of FATF

  • FATF adopts revised version of 40Rs imposing stricter standard

2001: 9/11 – FATF adopts 8 (now 9) SRs on terrorist financing

1990: FATF issues 40Rs on measures to combat

1996: FATF adopts revised version of 40Rs

FIC continues to expand and enhance its capability to assist law enforcement agencies in investigations and actions relating to proceeds of crime


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financial intelligence centre

REPUBLIC OF SOUTH AFRICA

AML/ CFT

Investigation

and

Prosecution

AML/ CFT

Regulation

And

Supervision

Structures

Legislative framework

Structures

South African

Police Service

South African Reserve Bank

Financial Intelligence Centre Act:

Establishes FIC Identification

Provides for powers Record-keeping

and functions of FIC Reporting

Internal rules

National Prosecuting Authority

Directorate for Special Operations

Asset Forfeiture Unit

Financial Services Board

Estate Agency Affairs Board

Prevention of Organised Crime Act

Protection of Constitutional Democracy against Terrorist and Related Activities Act

  • Criminal Procedure Act

  • Monitoring and Interception Prohibition Act

  • National Prosecuting Authority Act

  • International Co-operation in Criminal Matters Act

Banks Act

FAIS Act

Independent Regulatory Board of Auditors (PAAB)

National Gambling Board

JSE

Law Society of SA


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financial intelligence centre

REPUBLIC OF SOUTH AFRICA

POLICY AND OPERATIONAL ENVIRONMENT

United Nations Conventions

Vienna Convention/ Palermo Convention/ Terrorist Financing

Security Council Resolutions

International AML/ CFT Context

Standard: Financial Action Task Force (40Rs + 9SRs)

FATF- Regional Bodies (eg, Esaamlg)

Interact with IMF/ World Bank/ United Nations/ Commonwealth Sec

SA’s Policy Environment

Financial Intelligence Centre with

Other Gov Depts eg. Treasury, Police, Justice, Foreign Affairs

AML/ CFT Operations

Financial Intelligence Centre

Accountable and reporting Institutions (private sector)

Supervisory Bodies/ Law Enforcement


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financial intelligence centre

REPUBLIC OF SOUTH AFRICA

Financial Action Task Force

  • Inter-Governmental Body consisting of 33 members

  • Purpose to develop and promote  national and international policies to combat money laundering and terrorist financing

  • Objective to generate political will to bring about legislative and regulatory reforms in these areas

  • Policies expressed in the form of standards:

    • 40 Recommendations on Money Laundering

    • 9 Special Recommendations on Terrorist Financing

  • Assessment methodology

  • Typology studies


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financial intelligence centre

REPUBLIC OF SOUTH AFRICA

CORE INSTITUTIONAL STAKEHOLDERS

Parliament

Minister of

Finance

Financial

Intelligence

Centre

Law enforcement,

Revenue,

intelligence

& prosecution

authorities

Supervisory Bodies

Accountable

Institutions

(businesses)

in private sector


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financial intelligence centre

REPUBLIC OF SOUTH AFRICA

FIC “Value – Add” Chain

(6) Investigation &

Prosecutions by

LEA’s & NPA

(4) Analysis

by FIC

(5) Referral by FIC to LEA’s

(3) Reporting

to FIC

(7) Trends analysis

by FIC with partners

(2) Compliance

monitoring

FIC

(1) Compliance

measures

(9) Legislation

development

(8) Policy

development


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financial intelligence centre

REPUBLIC OF SOUTH AFRICA

AML/ CFT ARCHITECTURE

International Standard – Financial Action Task Force 40+9 Rs

International

Links/ fiu’s

Investigative

Authorities &

Intelligence Agencies, eg.

Accountable Institutions, eg.

Policy &

country eval

sharing

SAPS

Bank

FIC

Data storage

Analysis

Referrals

Supervisory Bodies (FSB, SARB, JSE, etc)

Monitor Compliance of Accountable Inst’s

Reports

NPA

-DSO

-AFU

Insur-

ance

Referals

Intelligence Agencies

Awareness

SARS

Casino

Investigations & Prosecutions


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OBLIGATIONS ON

ACCOUNTABLE INSTITUTIONS

financial intelligence centre

REPUBLIC OF SOUTH AFRICA

  • These are institutions most vulnerable to money-laundering -

  • 19 categories of different institutions – eg. banks, insurance industry, brokers, casinos, accountants, lawyers, estate agents

FIC

Banks

Data storage

Analysis

Reports

Suspicious Transaction Reports sent to FIC

Insurance

sector

  • Obligations of Accountable Institutions:

  • Required to submit Suspicious Transactions Reports (STRs)

  • Required to:

    • Keep records for 5 years

    • Identify and verify clients

    • Appoint Compliance Officer

    • Training for staff

  • Future Reporting obligations

  • Add more accountable institutions – eg. diamonds/ gold dealers?

Casinos


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financial intelligence centre

REPUBLIC OF SOUTH AFRICA

SUPERVISORY BODIES

Supervisory

Bodies

  • Listed in Schedule 2 of the Act

    • These are: the Financial Services Board; SA Reserve Bank; Companies and Intellectual Property Registration Organisation; Estate Agency Affairs Board, Independent Regulatory Board of Auditors (PAAB), National Gambling Board, JSE Securities Exchange, & SA Law Society;

  • Obliged to monitor the level of compliance by accountable institutions

  • ‘Statutory’ vs. ‘self-regulatory’ bodies vs. non-supervised bodies;

    • FIC obligated to act as ‘supervisor of last resort’ where no supervisor exists;

    • Establish regional offices to monitor compliance and conduct compliance inspections;

  • FIC to conduct compliance inspections on acc inst’s and sup bodies.

Banks

Monitor Compliance

Insurance

sector

Casinos


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financial intelligence centre

REPUBLIC OF SOUTH AFRICA

Ministries Departments and Supervisors responsible for oversight of sectors

Gov SARB

Finance

Finance

Trade &

Industry

Trade &

Industry

Trade &

Industry

Justice

Finance

AN Other

Ministry

Banking Sup

JSE Stock

Exchange

Companies

Register

FIC

Supervisor

Fin Services

Board

Estate Agency

Affairs Board

Nat Gambling

Board

Law Society

Ind Reg

Board of Auds

Finance

services

Stock

Brokers

Gambling

Estate

Agents

Companies

Lawyers

Banks

Account’nts

Others

Sector


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financial intelligence centre

REPUBLIC OF SOUTH AFRICA

LAW ENFORCEMENT AUTHORITIES

Referrals sent from FIC

FIC

Data capture

Analysis

Reports

NPA

- AFU

- DSO

  • Investigate and prosecute cases involving proceeds of crime

  • Receive referrals from FIC

  • Makes requests to FIC for additional information

  • Appoint Authorised Officers

    • To protect integrity of information;

  • Provide access to government databases to verify info;

    • Ability to search criminal databases;

  • Ensure regular feedback on progress made in investigations and prosecutions

  • Collect and report statistics.

SASS

SAPS

NIA

SARS


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financial intelligence centre

REPUBLIC OF SOUTH AFRICA

REPORTING & FEEDBACK

STRs

Feedback & requests

Set by law

15 working days

7 working days

Data storage

Analysis

Reports

FIC

Accountable

Institutions

Law Enforcement

Authorities

Quarterly with Sup Bodies

6 monthly with Acc Insts

X working days

Feedback & requests

Intelligence Package Referred


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financial intelligence centre

REPUBLIC OF SOUTH AFRICA

3. THE FINANCIAL INTELLIGENCE CENTRE

  • The FIC’s legal obligations, location and accountability

  • Responsibilities

  • Structure

  • Past Financial Year

  • Future


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financial intelligence centre

REPUBLIC OF SOUTH AFRICA

THE FINANCIAL INTELLIGENCE CENTRE

  • Legal obligations, location and accountability:

    • The Financial Intelligence Centre is defined as a juristic person;

    • Located outside the public service, but within the public administration in terms of section 195 of Constitution;

    • Accountable directly to Minister of Finance;

    • Funded from national budget;

    • Physically located in the National Treasury, Pretoria.


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financial intelligence centre

REPUBLIC OF SOUTH AFRICA

Centre’s Responsibilities

Core responsibilities for the Centre include that it:

  • Analyses information obtained in reports from ‘accountable institutions’;

  • Refer information to Law Enforcement Authorities - eg. SAPS, DSO (Scorpions), AFU, SARS, the Intelligence Services;

  • Coordinates SA’s policy on AML/ CFT - thus liaises closely with National Treasury and all stakeholders in public and private sector and internationally;

  • Monitors the Supervisory Bodies (SARB, FSB, NGB, etc) & gives guidance to accountable institutions, supervisory bodies and others;


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financial intelligence centre

REPUBLIC OF SOUTH AFRICA

Centre’s Responsibilities (cont)

  • Monitors and inspects for compliance where no supervisory body exists, eg. parastatals, Post Bank;

  • Exchanges information with similar bodies in other countries – other financial intelligence units;

  • Participates in and liaises with Financial Action Task Force (FATF) and other non-SA bodies.

  • Administers the Financial Intelligence Centre Act


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financial intelligence centre

REPUBLIC OF SOUTH AFRICA

FICA ADMINISTRATION


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financial intelligence centre

REPUBLIC OF SOUTH AFRICA

FIC STRUCTURE AND STAFFING COMPONENTS


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financial intelligence centre

REPUBLIC OF SOUTH AFRICA

4. Annual Report 2006/07

  • Legislation and policy:

  • Amendment Bill

    • - Structural amendments and administrative penalties Bill

  • Legislation review

    • Impact of the revised FATF 40 Recommendations and

    • 9 Special Recommendations

    • Mutual Evaluation results

  • Mutual Evaluation preparation for mid-2008

  • Participation in FATF and its working committees

  • Participation in Esaamlg

    • - Review of Secretariat functions

    • - Technical assistance


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financial intelligence centre

REPUBLIC OF SOUTH AFRICA

Reporting

  • 21 466 suspicious transaction reports received.

  • Majority of these reports were received from financial service providers such as banks, brokers, foreign exchange dealers, insurance providers, investment managers and services, and money remitters (18 799 reports constituting 88% of all reports).

  • 12% (2667 reports) were received from other sectors such as casinos, estate agents, coin dealers, companies, accountants and auditors, attorneys, car dealers and individuals.

  • 549 referrals to investigating authorities, with a value in excess of R1,4 billion.


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financial intelligence centre

REPUBLIC OF SOUTH AFRICA

STRs received year-on-year


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financial intelligence centre

REPUBLIC OF SOUTH AFRICA

Financial/ Non-financial reporting for year


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financial intelligence centre

REPUBLIC OF SOUTH AFRICA

Compliance and Prevention Achievements

This includes the following successes:

  • Monitor compliance implementation;

  • Facilitate draft guidance notes for suspicious transaction reporting and terror financing reporting;

  • Joint compliance audit with National Gambling Board of 29 casinos;

  • Joint compliance audit with Exchange Control Department of 18 authorised dealers in foreign exchange with limited authority;

  • Joint compliance audit with Estate Agency Affairs Board of 12 estate agencies;

  • Facilitate signature of MOU with FSB in March 2007;

  • Public awareness activities and training;

  • Regular engagement with key stakeholders;

  • Run pilot ‘internship’ with 4 interns absorbed into structure on 1 April 07;

  • Assist in development of an administrative penalty regime.


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financial intelligence centre

REPUBLIC OF SOUTH AFRICA


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Assumptions: Inclusive of 14% VAT

The exact development and infrastructure costs will be determined by the tendering process

The Project Manager, Sys Architect and Business Analyst will be on board on a full-time basis until May 2008

Project Administrator available 60% of the time

Includes two office moves (intermediate and final move)

Scope of development is dependent on the outcome of the benchmarking process

FIC IT resources are on board as planned

Excludes resources shadowing overhead

Prolonged mobilisation timelines for new staff may affect the budget and timelines

financial intelligence centre

REPUBLIC OF SOUTH AFRICA


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financial intelligence centre

REPUBLIC OF SOUTH AFRICA

AML/ CFT system and FIC roll-out: Next steps (cont)

Legal and Policy

  • Amendment implementation and administration

  • Review of Legislation

  • Mutual Evaluation preparation for 2008

  • International Organisations participation

  • Technical assistance in the Region to Esaamlg member countries


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financial intelligence centre

REPUBLIC OF SOUTH AFRICA

AML/ CFT system and FIC roll-out: Next steps (cont)

Analysis

  • Continue to capture reports;

  • Increase numbers of referrals;

  • Staffing and skills;

  • IT infrastructure.

  • Access to databases

    - Either direct or indirect.

  • Continue to develop Memoranda of Understanding with all stakeholders: domestic and international FIUs for exchange of information

    Law Enforcement

  • Capacity-building:

  • Skills training of financial investigators – courses (ongoing);

  • Skills training of Authorised Officers.

  • Deepen coordination – task teams; provincial and local abilities (ongoing).


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financial intelligence centre

REPUBLIC OF SOUTH AFRICA

AML/ CFT AND FIC Roll-out: Next steps (cont)

Compliance and Prevention

  • Continue to facilitate the issuance of guidance notes to sectors;

  • Broaden and intensify the compliance audit of accountable and reporting institutions in designated sectors;

  • Develop risk-based approach to compliance;

  • Apply an administration penalty regime;

  • Establish dedicated inspectorate capacity;

  • Enhance Public Awareness and Training outreach;

  • Support FIC strategic threat analysis to determine where and what major ML/ FT activities are taking place.

    International

  • Continue to Strengthen Esaamlg;

  • Provide technical assistance to Esaamlg countries;

  • Engage with FATF, Egmont and other international institutions.


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financial intelligence centre

REPUBLIC OF SOUTH AFRICA

AML/ CFT AND FIC Roll-out: Next steps (cont)

Stabilising and Growing the Financial Intelligence Centre

  • To occupy additional premises until new building in 2 years

    • Customised, specialised space.

  • Information Technology

    • Scope, develop and implement full, integrated system: completion for testing end 2008;

    • Security standards.

  • Internal systems and operating procedures

    • Standard operating systems; Ethics basis.

  • FIC staffing

    • Aim for 135 by end this financial year - mission critical posts;

    • Induction processes, development, retention plans;

    • Increase numbers of secondees from law enforcement and supervisory bodies.


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financial intelligence centre

REPUBLIC OF SOUTH AFRICA

THANK YOU

Murray Michell

Director: Financial Intelligence Centre

012 – 3099200

www.fic.gov.za

[email protected]


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