The Financial Intelligence Centre Act (FICA)

• FICA’s purpose is to combat money-laundering activities and the financing of terrorist and related activities.

• It is aimed at identifying suspicious transactions so that the people who engage in money laundering activities can be charged under POCA.

• Suspicious transactions must be reported to FICA.

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The purpose of this Awareness Training is to provide you with the insight and knowledge of the implications of the Financial Intelligence Act on your work in the financial services industry. Most importantly you need to know the requirements that this Act imposes on FSP’s so that you can comply with it on a daily basis. Non- Compliance may lead to harsh penalties.

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• FICA – Financial Intelligence Centre Act

• FSP – Financial Services Provider

• POCA – Prevention of Organized Crime Act

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Through the Awareness Training, you are going to learn how to comply with the requirements of FICA, as it applies to the FSP and yourself.

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There are two very important underlying concepts with regard to FICA:

• Money – laundering

• Unlawful activities

What is money laundering activity?

A money-laundering activity is any activity that has the effect of concealing or disguising the nature, source, location, disposition or movement of the proceeds of unlawful activities. (Disguising illegal money)

Money-laundering is a three-stage process:

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1. The first stage is placement, where the origin of the illegal money is usually mixed with the origin of legitimate money. The proceeds of unlawful business are in the form of cash, making it relatively simple to get the illegal money back into the financial system by mixing it with the proceeds of cash business. The “dirty” money is there for disguised, and the illegal funds avoid detection.

2. In the second stage, money launderers try to achieve disguising the ownership, origin, audit trail, profit and source of crime.​

3. The third stage consists of a series of more transactions, designed to make the funds available to the criminal again. This is achieved by accessing the funds and using it for legitimate purposes. The funds are now fully integrated into the financial system.

The four money-laundering control obligations:

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• Identify and verify clients.

• Report suspicious transactions.

• Report cash transactions over the prescribed limit.

• Adhering to the internal rules.

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The duty to report suspicious transactions:

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1. Reporting suspicious transactions: A person liaising with a client on behalf of the business is required to report any suspicion on his part of receiving proceeds of unlawful activities from a client. A person who has reported a suspicious transaction may not inform the client that such a report has been made (so-called “tipping off”). In practice, this process is mostly handled by the money-laundering reporting officer of an institution.

2. Possible indicators of a suspicious transaction:

   • Payments made to a third party.

   • Constant movement of money among different business entities.

   • Transactions that have no apparent business purpose.

   • Transactions involving large cash amounts. (The prescribed limit of a cash transaction as of 2011 is R24 999.99 or an aggregate of smaller amounts which, combined, add up to this amount if it appears that the transactions involving these amounts are linked to being considered fractions of one transaction.)

   • A client makes cash deposits to a general account of a foreign correspondent bank.

   • A client has numerous accounts and makes or receives cash deposits in each of them amounting to a large aggregated amount.

   • A client makes a large volume of cash deposits from a business that is normally not cash-intensive.

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