Frequently asked questions: FIC session

Frequently asked questions: FIC session 1. What is Cash Threshold Reporting (CTR)? Section 28 of the Financial Intelligence Centre Act, No. 38 of 2001 (the FIC Act) makes it obligatory for all accountable institutions and reporting institutions to report cash transactions above the prescribed limit. 2. What is the prescribed limit? The prescribed limit will be R24 999, 99. Accountable and reporting institutions have to report all cash transactions above R24 999, 99. 3. What does cash transactions mean? This means all transactions, whether received or paid by the accountable institution and the reporting institution involving domestic and foreign notes and coins, and includes travellers cheques. 4. Who has to report in terms of section 28 of the FIC Act? Section 28 of the FIC Act came into operation during October 2010 with respect to three selected business sectors, namely: Casinos; Attorneys; and Motor vehicle dealers. It is envisaged that it will come into operation on 01 December 2010 for all other accountable and reporting institutions referred to in Schedules 1 and 3 respectively. 5. Is the cash threshold reporting obligation being rolled out in phases? The rest of the business fraternity, identified as either accountable or reporting institutions will only be required to report cash transactions above the prescribed limit to the Centre towards the end of 2010. 1 P a g e

6. What is the reporting period? Cash transactions above the prescribed limit must be reported to the Centre within two (2) business days after the accountable or reporting institution became aware of the transaction. 7. Does the aggregation of transactions form part of the obligation to report in terms of section 28? If yes, what is the calculation period? Aggregation of transactions does form part of the obligation to report in terms of section 28. This means that the additional transaction/s will be viewed as part of the original transaction. The calculation period is one (1) business day and a series of transaction, taking place within one business day needs to be reported if it exceeds the prescribed threshold. In the event that an institution operates 24 hours a day, the period to be used for aggregation of transactions will be the normal business day as utilised by the institution for accounting purposes i.e. excluding weekends and public holidays. Where a client operates more than one account with a bank, each account should be viewed individually for purposes of aggregation of cash transactions conducted on that particular account. All other industries should detect transactions that are above the threshold per client using their identity document number. Reportable transactions are directional, i.e. either inwards or outwards. 8. If my business receives cash via an agent or third party, e.g. bank, do I still have to report in terms of section 28? Both the agent/third party and the accountable/reporting institutions must report such a transaction if it is above the prescribed limit. 2 P a g e

Receipt of cash includes awareness or knowledge of cash received either by an agent or a third party in terms of the transaction. When the accountable and/or reporting institution becomes aware of the receipt of cash as described above, a report must be submitted to the Centre in terms of section 28 within two (2) business days of the transaction. 9. Money is being remitted via a system where the client does not have a bank account with the accountable institution. The transaction is in line with the provisions of section 28. Does this transaction have to be reported in terms of section 28? Reporting in terms of section 28 is not dependant on the client having an account with the accountable institution. The purpose of section 28 is to enable accountable and reporting institutions to report cash received above the prescribed limit. If the money that is being remitted exceeds the prescribed amount and falls within the definition of cash, a report must be submitted to the Centre in terms of section 28. 10. How does an accountable institution report a money remittance transaction where the client does not have an account with the accountable institution? The accountable institution will have to report all available information to the Centre, including an attempt by a client to enter into a cash transaction. 11. Does a Cash Threshold Report replace other reports such as Suspicious and Unusual Transaction Reports and Terror Property Reports? No. A report in terms of section 28 deals specifically with cash transactions in excess of the prescribed amount (R25 000) and does not replace such reports. It is possible that a cash transaction can also be regarded as suspicious or unusual, in which case dual reporting has to be made. 12. Do I need to require secure login credentials from the Centre to report in terms of section 28? Yes. The Centre has designed a secure online login process to enable reporters to file reports in terms of section 28 electronically with the Centre. The portal for acquiring the login credentials 3 P a g e

to enable cash threshold reporting to the Centre can be accessed on the Centre s website at www.fic.gov.za. Accountable institutions and reporting institutions that do not have access to the internet may also report cash transactions on a manually completed form. Forms will be made available to such reporters upon a telephonic request to the Centre. To obtain a form, the Centre can be contacted. 13. Why do I have to obtain secure login credentials details before submitting a report in terms of section 28? The Centre requires you to obtain secure login credentials which will enable you to report in terms of section 28. This will allow for easy submission of reports and you will not have to repeatedly provide your information when submitting a report, as the reporter s information on the reporting form will be pre-populated upon entering the reporter s login credentials. 14. I have obtained my secure login credentials from the Centre. How do I report in terms of section 28? Individual Reporting - Reports can be sent by completing an online form. This reporting mechanism is aimed at low volume of reporting; Batch Reporting - This mechanism of reporting involves the batching of reports over a period of time and sending the reports to the Centre in a batch over an agreed time period. The batch will be sent to the Centre via a web service (special web form) accessed through the Centre s web site. This mechanism requires manual intervention to access the web service and sending the batch reports; and System-to-System - This form of reporting accommodates both the individual and batch reporting mechanism. It is the configuration of systems to be able to link to each other via web services to send reports. Should you wish to make use of batch reporting or system-to system reporting, it is suggested that you contact the Centre s IT Department for assistance. 15. What ICT developments do I need on my IT system to be able to file CTR? 4 P a g e

For individual reporting you only need access to the internet; For batch reporting you need access to the internet and your IT system will have to be configured to meet the Centre s data requirements; and For system-to system reporting your IT system will have to be configured to meet the Centre s data requirements and also to establish a link between the institution and the Centre. 16. Are there penalties associated with non compliance? Once operative, it is a legal obligation in terms of section 28 of the FIC Act. Failure to comply with the provisions of this section is an offence and is punishable with imprisonment for a period not exceeding 15 years or to a fine not exceeding R10 000000. 17. Definition of receiving of cash. Does the term receiving of cash include the situation where a client deposits money into an ATM or trust account, or is the scope of the provision limited to receiving physical cash over the counter? Yes. The term receiving of cash includes the situation where a client physically deposits money into an ATM or makes a physical deposit at a bank branch into a trust account. Cash is defined in section 1 of the FIC Act as: (a) (b) coin and paper money of the Republic or of another country that is designated as legal tender and that circulates as, and is customarily used and accepted as, a medium of exchange in the country of issue; travellers cheques. Cash does not include negotiable instruments as defined in the FIC Act. Cash also does not include a transfer of funds by means of bank cheque, bank draft, electronic funds transfer, wire transfer or other written order that does not involve the physical transfer of cash, and these methods of transferring funds will not be covered by the CTR obligation under section 28 of the FIC Act. 5 P a g e

Physical cash payments in excess of the threshold amount received by the affected accountable institution will have to be reported. Where an affected accountable institution pays a client physical cash in excess of the threshold amount this will have to be reported to the Centre under section 28 of the FIC Act. The affected accountable institutions will also be responsible to report cash in excess of the threshold amount received by an agent on their behalf, e.g. cash received by a bank on behalf of an affected accountable institution. Note that where cash in excess of the threshold amount is received or paid by a bank into or from an account held in the name of the affected accountable institution, there is a duty on the bank as well as on the affected accountable institution to report the cash transaction to the Centre under section 28 of the FIC Act. 18. Applying different cash threshold limits? It is the Centre s view that for ease of implementation, a single threshold will be set across all sectors. Accordingly, section 28 of the FIC Act will be made operational with a single threshold across all the sectors. Multiple limits will only be considered after reviewing the effectiveness of a single threshold after at least a two year period of application. Once feedback regarding the appropriateness of the limits has been received, the prescribed cash threshold limit may be reviewed for specific sectors. 19. Please advise whether the requirement to register is an obligation in itself or whether the accountable institution is only required to register in order to file a report to the FIC? In terms of section 43B of the Financial Intelligence Centre Act, No. 38 of 2001 (FIC Act) as inserted by section 14 of the Financial Intelligence Centre Amendment Act, No. 11 of 2008 (FIC Amendment Act), all Accountable Institutions (listed in Schedule 1 to the FIC Act) and Reporting Institutions (listed in schedule 3 to the FIC Act) must register with the Centre within the prescribed period and in the prescribed manner. 6 P a g e

In terms of Section 61A of the FIC Act a failure to register is an offence and subject to a fine not exceeding R1 million or imprisonment for a period of up to 5 years. Alternatively, the Centre may also, in terms of section 45C (1) of the FIC Amendment Act, impose an administrative sanction for a failure to comply with any provision of the FIC Amendment Act. Registration requirement is a legal requirement. However, the acquiring of login credentials is a prerequisite for reporting, while the same information provided for login credentials might be migrated and be used for the AI /RI registration database, upon confirmation by the accountable/reporting institution that the information is still correct. 20. If I appoint my auditor as a validator what are his requirements and annual responsibilities, does he need to complete and submit documents/forms? Kindly note that the person nominated to be the validator for purposes of acquiring secure login credentials is only required to verify the information submitted by the accountable or reporting institution on the registration form. Kindly further note that the validator will be required to verify/validate any changes that the accountable or reporting institution wishes to effect on their registration account. Once you have successfully registered and acquired your secure login credentials, it will become your responsibility to submit reports in terms of section 28 (once operational), 28A and 29 of the FIC Act to the Centre. The registration portal also makes provision for the registration of a money laundering reporting officer (MLRO) with the duty to report any suspicious, unusual or cash transactions. 21. In terms of the recent FIC Amendment Act, I as a Long-Term Insurance Broker & Investment Advisor is suppose to Register as an Accountable Institution. I tried to register however when 7 P a g e

it comes to Entity Name I was unable to insert my Entity name in the Block as it did not appear that the block provided for any new entities? If the name of your entity does not appear on the dropdown list, select other (listed alphabetically under o ) and a free text box will appear and you will be able to insert your entity s name. If you require further technical assistance in this regard, kindly contact the Service Desk at 012 641 6123 or alternatively email to Servicedesk@fic.gov.za. 22. Please could you let us know what date the STR and TPR forms need to be submitted by? Section 29 read with Chapter 4 of the Money Laundering and Terrorist Financing Control Regulations of the Financial Intelligence Centre Act, Act No. 38 of 2001 (the FIC Act) requires a person who carries on a business or is in charge of or manages a business or who is employed by a business to report suspicious and unusual transactions to the Centre in the prescribed manner within 15 days of when the suspicion has been formed. Guidance Note 4 may also be consulted to acquire more information on the process of reporting STRs and CTRs. Section 28A of the FIC Act requires an accountable institution to submit a Terrorist Property Report within 5 days to the Centre. Accountable and Reporting Institutions must acquire the new login credentials to submit a Suspicious Transaction Report or a Terrorist Property Report to the Centre. The login credentials that were previously issued to regular reporters expired on 20 August 2010 and can no longer be used. 23. What must I do to be a FICA compliance officer? Do I need to register with the Centre? Please note that you are an accountable institution for purposes of the Financial Intelligence Centre Act, Act No 38 of 2001 (the FIC Act) if you fall within any of the 19 categories referred to in Schedule 1 of the FIC Act. The FIC Act places, inter alia, customer identification and 8 P a g e

verification (CIV) requirements upon accountable institutions, as well as the requirement to report certain transactions to the Financial Intelligence Centre (the Centre). You are advised to consult the FIC Act and the Money Laundering and Terrorist Financing Control Regulations (the Regulations) in this regard. The principle obligations of an accountable institution have been summarised below, though this list should not be taken to be exhaustive: Customer identification and record keeping (sections 21 and 22) Record keeping obligations Reporting of cash transactions above the prescribed limit (section 28) Reporting of property associated with terrorist activities (section 28A) Reporting of suspicious transactions (section 29) Formulation and implementation of internal rules (section 42) Anti- money laundering training for staff and the appointment of a compliance officer (section 43) Registering with the Centre (section 43B) The abovementioned provisions should be read in conjunction with the Regulations. The requirement for accountable institutions to register with the Centre (section 43B) and cash threshold reporting (section 28) will only become operational at a future date. It is envisaged that this date will be 01 December 2010 in the case of financial services providers. A compliance officer, appointed in terms of section 43(b) of the FIC Act is required to implement, monitor and ensure that the accountable institution complies with the requirements of the FIC Act. There is no formal registration process where you are 'licensed' as a compliance officer, and the Centre recommends that a senior employee be entrusted with the responsibility to ensure compliance. 9 P a g e

24. Within an accountable institution, which of the employees are subject to FICA training under section 43 of the Act and how often must FICA training be done? Section 43 of the Financial Intelligence Centre Act, Act 38 of 2001 (the FIC Act) deals with training and monitoring of compliance. In terms of section 43 an accountable intuition must provide training to its employees to enable them to comply with the provisions of the FIC Act and the internal rules applicable to them. It is the view of the Centre that all staff members should have a general understanding of the provisions of the FIC Act. Accountable institutions have to establish from their risk frame work and business operations which of their employees need to be trained on the provisions of the FIC Act and the level of training to be provided to relevant staff. All relevant staff within the institution should receive appropriate training in line with their responsibilities, activities and skills. Some staff may require only basic training on the relevant legislation, the accountable institution s procedures, and the more obvious warning signs in relation to money laundering. Staff members that interact with clients are required to have more intensive training. The FIC Act does not stipulate the frequency of training. It is the view of the Centre that training should be ongoing and could take the form of refresher courses. This will enable employees to remain informed of developments relating to money laundering legislation, risk factors and trends. Any changes to the accountable institution s internal rules and changes in legislation should also be communicated to all relevant staff members. It is also recommended that employees be tested on their knowledge of the FIC Act and Regulations and that a training register be maintained and signed by employees that have received training. 10 P a g e

25. I have not been able to complete my registration as I operate a one man business in which I am the Key Individual, Member, Advisor and I cannot be registered as a validator because my name will be duplicated. The Centre is aware of the problem relating to the acquiring of log-in credentials by sole proprietors and is in the process of addressing the problem. If you make use of an outsourced compliance officer, you are welcome to use this compliance officer to validate the information provided by yourself. If not, please attempt to acquire your login credentials again at a later stage. It is envisaged that compulsory registration with the Centre in terms of section 43B of the Financial Intelligence Centre Act, No. 38 of 2001 (the FIC Act), as inserted by section 14 of the Financial Intelligence Centre Amendment Act, No. 11 of 2008 will commence on 01 December. The information provided during the process of acquiring login credentials may be used for registration purposes upon receipt of confirmation that it is still correct. By that time, the current problem with the acquiring of login credentials by sole proprietors will be rectified. 26. What is the difference between a section 43 compliance officer in terms of the FIC Act and a section 17 compliance officer approved under the FAIS Act? Section 43(b) of the FIC Act state: An accountable institution must appoint a person with the responsibility to ensure compliance by- (i) the employees of the accountable institution with the provisions of this Act and the internal rules applicable to them; and (ii) the accountable institution with its obligations under this Act. Section 17(1)(a) of the FAIS Act refer: Any authorised financial services provider with more than one key individual or one or more representatives must, subject to section 35(1)(c), appoint one or more compliance officers to monitor compliance with this Act by the provider and such representative or representatives, 11 P a g e

particularly in accordance with the procedures contemplated in subsection (3), and to take responsibility for liaison with the registrar. A compliance officer in terms of the FIC Act is required to implement, monitor and ensure that the accountable institution complies with the requirements of the FIC Act. There is no formal registration process or approval process where you are 'licensed' as a compliance officer, and the Centre recommends that a senior employee be entrusted with the responsibility to ensure compliance. The Centre does not envisage that the compliance function as described in section 43 of the FIC Act be outsourced to a third party. A FAIS compliance officer is approved and authorised to act as either an internal and/or external compliance officer in terms of section 17 in the FAIS Act. The compliance function can thus be outsourced to a third party and an FSP (financial services provider) can employ the services of an outsourced compliance practice/officer. 27. Is short term and medical aid brokers still excluded from Schedule 1 to the FIC Act? Short term (both personal and commercial lines) and medical aid (health service benefits) insurers/brokers are not accountable institutions in terms of Schedule 1 to the Financial Intelligence Centre Act, Act 38 of 2001 (the FIC Act). Kindly take further note that section 29 of the FIC Act requires a person, whether they are an accountable institution or not, who carries on a business or is in charge of or manages a business or who is employed by a business to report suspicious and unusual transactions to the Centre in the prescribed manner. Section 29 is therefore also applicable to short term and medical scheme brokers. Section 28A is only applicable to accountable institutions. Please note that it is not compulsory for entities registered as short-term insurance and medical aid brokers only, to acquire login credentials. You can file a suspicious transaction report in terms of section 29 online on our website www.fic.gov.za and click on REPORTS AND REQUESTS, then CAPTURE INTELLIGENCE REPORTS. 12 P a g e

28. Do I need to register both under item 8 in Schedule 1 and item 1 in Schedule 3? Example: If I am a motor vehicle dealer by trade and registered for a long term insurance category under my FAIS license do I need to register both as an accountable and reporting institution? Schedule 1 Item 8 state: A person who carries on a 'long-term insurance business' as defined in the Long-Term Insurance Act, 1998 (Act 52 of 1998), including an insurance broker and an agent of an insurer. Schedule 3 Item 1 refer: A person who carries on the business of dealing in motor vehicles. A motor vehicle dealer is obliged to register both as an accountable institution (if the motor vehicle dealer also holds an FSP license) and as a reporting institution. If the motor vehicle dealer and the broker has exactly the same name, it is suggested that the words broker division be added to the name for the registration as an accountable institution (broker). 29. I would like to know why you need third party verification for proof of residence to be a sworn affadavit. Would a declaration by a third party that the client does reside at the said address suffice as proof of residence? Section 21 of the Financial Intelligence Centre Act, Act 38 of 2001 (the FIC Act) stipulates that an accountable institution may not establish a business relationship or conclude a single transaction with a client unless the accountable institution has taken the prescribed steps to establish and verify the identity of the client. Regulation 4(3) of the Money Laundering and Terror Financing Control Regulations (the Regulations) requires accountable institutions to use information which can reasonably be expected to achieve the verification of the required address. The most secure way to ensure the correct validation of an address could be achieved through an agent visiting such an 13 P a g e

address. However, the Centre does not prescribe the manner in which such verification can be obtained, but merely provides guidance to institutions to assist in this regard. When verifying the residential address of a client the following examples may offer confirmation of residential address: a utility bill reflecting the name and residential address of the person; a bank statement from another bank reflecting the name and residential address of the person if the person previously transacted with a bank registered in terms of the Banks Act and that bank had confirmed the person s particulars; a recent lease or rental agreement reflecting the name and residential address of the person; municipal rates and taxed invoice reflecting the name and residential address of the person; mortgage statement from another institution reflecting the name and residential address of the person; telephone or cellular account reflecting the name and residential address of the person; valid television licence reflecting the name and residential address of the person; recent long-term or short-term insurance policy document issued by an insurance company and reflecting the name and residential address of the person; or recent motor vehicle licence documentation reflecting the name and residential address of the person. When a recent utility bill from a telephone or cellular account, Eskom or a local authority does not identify the physical address of the property owner (that is, if the bill is sent to a postal address), the utility bill will still be acceptable provided the client s name and the erf/stand and township details are reflected on the utility bill. The client s physical address, erf number and township should be recorded, and the township cross-referenced to the suburb in which the client resides. 14 P a g e

If thereafter there is any doubt about the client or the physical address of the client, the erf/stand and township details should be verified by reference to the Deeds Office. If none of the above is available, other means to verify a client s address such as an affidavit containing the following particulars from a person co-habiting with the client or an employer of the client: name, residential address, identity number of the client and the deponent of the affidavit; relationship between the client and the deponent of the affidavit; and confirmation of the client s residential address. Each accountable institution is responsible for establishing which documentation is acceptable to verify the obtained information, within the internal risk framework of the accountable institution. 30. I am registered to conduct intermediary and advisory services in respect of both long-term insurance business as well as short-term insurance business, but I have never conducted longterm brokerage business. Do I need to register/acquire login credentials? If you have never conducted long-term insurance business, strictly speaking you are not required to register/ acquire login credentials with the Centre. But if you have conducted any advice and/or intermediary services in respect of the long-term insurance products in the past or intend to conduct any future business you have to ensure that all the requirements relating to the FIC Act and Regulations are complied with and implemented before such business can be conducted. The requirement to register/ acquire login credentials will then become compulsory in terms of section 43B in the FIC Amendment Act. 15 P a g e

31. I am registered to provide advisory and intermediary services in respect of long-term insurance business, but all the products that I provide advice on are exempted from the requirements to conduct customer identification and verification. Do I still need to register? Even though some of the long-term insurance products have been exempted from the requirements to conduct customer identification and verification, every accountable institution referred to in Schedule 1 and every reporting institution referred to in Schedule 3 must register with the Centre within the prescribed period and in the prescribed manner as stipulated in section 43B of the Financial Intelligence Centre Amendment Act, No. 11 of 2008 (FIC Amendment Act). It is envisaged that this date will be 01 December 2010 in the case of financial services providers (FSPs). 16 P a g e