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 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
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.
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);
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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.
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;
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
financial intelligence centre REPUBLIC OF SOUTH AFRICA FICA ADMINISTRATION
financial intelligence centre REPUBLIC OF SOUTH AFRICA FIC STRUCTURE AND STAFFING COMPONENTS
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
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.
financial intelligence centre REPUBLIC OF SOUTH AFRICA STRs received year-on-year
financial intelligence centre REPUBLIC OF SOUTH AFRICA Financial/ Non-financial reporting for year
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.
financial intelligence centre REPUBLIC OF SOUTH AFRICA
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
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
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).
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.
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.
financial intelligence centre REPUBLIC OF SOUTH AFRICA THANK YOU Murray Michell Director: Financial Intelligence Centre 012 – 3099200 www.fic.gov.za Fic_feedback@fic.gov.za