Financial Intelligence Act 38 of 2001 intends: to establish a Financial Intelligence Centre and a Money Laundering Advisory Council in order to combat money laundering activities; to impose certain duties on institutions and other persons who might be used for money laundering purposes and the financing of terrorist activities and related activities. The FIC Act introduces a regulatory framework of measures requiring certain categories of businesses to fulfil compliance obligations.
Section 42 of the Financial Intelligence Centre Act (FICA) in South Africa mandates that accountable institutions develop, document, maintain, and implement a Risk Management and Compliance Programmme (RMCP) for anti-money laundering (AML), counter-terrorist financing (CTF), and counter-proliferation financing (CPF). This programme must be implemented on a risk-sensitive basis.
Key aspects of Section 42:
- RMCP Requirement: Accountable institutions, such as attorneys and commercial juristic entities, are required to create a comprehensive RMCP.
- Risk-Based Approach: The RMCP should be tailored to the specific risks faced by the institution in relation to money laundering and terrorist financing.
- Documentation: The RMCP must be documented, outlining all elements of the program.
- Implementation: The RMCP must be actively implemented and maintained by the institution.
- Training: Accountable institutions are required to provide ongoing training to their employees on AML and CTF, in accordance with the requirements of the RMCP.
- Reporting Obligations: Section 42 also outlines the requirement for accountable institutions to report suspicious and unusual transactions to the Financial Intelligence Centre (FIC).
- Guidance from FIC: The FIC provides guidance to assist accountable institutions in developing and implementing their RMCPs, including frameworks and practical examples.
- Consequences of Non-Compliance: Failure to comply with the requirements of Section 42 can result in administrative sanctions, including penalties. A financial penalty not exceeding R10 million in respect of natural persons and R50 million in respect of legal persons.
Non-compliance with these regulations can lead to financial penalties, legal repercussions and reputational damage. Effective compliance management requires developing policies, training employees and monitoring/auditing processes.
For more insights, developing, implementing, and the monitoring of sound legal compliance framework and programmes customized for businesses across industries, get in touch with senior consultants.
Dr Pete Mhlanga
PhD Law
Harvard Executive & Professional Development Program
LLM (Public International Law)
LLB (Company Law, Tax Law and Contracts Law)
