Complying with Changes in Legislation
Complying with Changes in Legislation 2013September/ October 2013
Delegates Workbook
Facilitated by ProBeta Training (Pty) Ltd.
The views expressed in this workbook are not necessarily reflective of the official views of Fasset.
Complying with Changes in Legislation
Contents
The Financial Intelligence Centre Act 38 of 2001 and the Financial Intelligence Centre Amendment Act, 2008 8
Purpose of the Act 8
Definition of a money laundering activity 8
Money Laundering legislation in South Africa 10
The Financial Intelligence Centre (“FIC”) 10
Money Laundering Control measures 10
Registration of accountable and reporting institutions 17
Directives 17
Responsibility for supervision of accountable institutions 18
Appointment of inspectors 18
Inspections 19
Administrative sanctions 20
Appeal 21
Compliance and enforcement 22
Schedules to the Act 23
Inspections by IRBA 25
Financial Advisory and Intermediary Services Act 26
Purpose of the Act 26
Definition of advice 26
Intermediary services 27
Authorisation of financial service providers 27
Application for authorisation 28
Lapsing of licence 28
Qualifications of representatives and duties of authorised financial service providers 29
Debarment process of representatives 29
Compliance officers and compliance arrangements 30
Accounting and audit requirements 30
Change in financial year-end 31
Exemption of FSP’s from audited financial statement requirements 31
Submission of annual financial statements 32
Submission of compliance reports 32
Reporting duty of auditors and compliance officers 34
Determination of Fit and Proper requirements 36
Application for an exemption in relation to qualifications and regulatory examinations 40
Professional indemnity and fidelity insurance cover 41
Offences and penalties 41
The National Credit Act No.34 of 2005 42
Purpose of the Act 42
Overview of the Act 42
Chapter 1 – Interpretation, Purpose and Application 42
Chapter 2 – Consumer Credit Institutions 46
Chapter 3 – Consumer Credit Industry Regulation 46
Chapter 4 – Consumer Credit Policy 47
Chapter 5 – Consumer Credit Agreements 50
Chapter 6 – Collection, Repayment, Surrender and Debt Enforcement 55
Compliance and Reporting – Chapter 8 of the Regulations 56
Debt counselling 57
Consumer Protection Act 59
Purpose of the Act 59
Application of the Act 59
Exemptions 61
Fundamental consumer rights 61
Protection of consumer rights and the consumer voice 71
Business names and industry codes of conduct 71
Protection of Personal Information Bill 73
Purpose of the Act 73
Application of the Act 73
What information is protected? 73
Exclusions 74
Conditions for lawful processing of personal information 74
Processing of special personal information 76
Information Protection Regulator 76
Information Protection Officer 76
Notification of processing 77
Rights of data subjects regarding unsolicited electronic communications and automated decision making 77
Enforcement 77
Offences and penalties 78
Implementation timeline 78
The Companies Act, 71 of 2008 79
Categories of companies (Section 8) 79
Criteria for names of companies (Section 11) 79
Financial statements (Section 29) 81
Annual financial statements (Section 30) 82
Access to financial statements / related information (Section 31) 90
Annual return (Section 33) 91
Access to company records (Section 26) 93
Appointment of auditor (Section 90) 94
Resignation of auditors & vacancies (Section 91) 94
Rotation of auditors (Section 92) 95
Rights and restricted functions of auditors (Section 93) 95
Director's personal financial interests (Section 75) 95
Directors conduct (Section 76) 97
Liability of directors and prescribed officers (Section 77) 98
Indemnification and directors’ insurance (Section 78) 99
Financial assistance for subscription of securities (Section 44) 100
Loans or other financial assistance to directors (Section 45) 101
Distributions (Section 46) 102
Deregistration 102
Re-instatement 103
Rejections in relation to applications for close corporations amendments 104
Alternative Payment Method 105
Cash Office Closure 105
Fax to Email 105
Drop-off Box for Registration and Amendments 106
Refunding of Customer Deposits 106
New Company Registration Certificate 106
Online verification of CIPC Certificates 107
Address of Actual Business Premises Required 107
Tax Administration Act 109
General 109
Powers and duties of SARS and SARS officials 110
Registration 112
Returns and records 113
Information gathering 116
Inspections 117
Inquiries 118
Search and seizure 120
Confidentiality of information 123
Assessments 125
Tax liability and payment 127
Taxpayer account and allocation of payments 130
Deferral of payment 131
Recovery of tax 132
Interest 134
Refunds 135
Write-off or compromise of tax debts 136
Administrative non-compliance penalties 139
Percentage based penalty 141
Procedures for imposing penalty 141
Understatement penalty 143
Voluntary disclosure programme 145
Criminal offences 147
Registration of tax practitioners and reporting of unprofessional conduct 148
Tax clearance certificates 152
Estate Agency Affairs Act 153
Purpose 153
Accounting and auditing requirements 153
Educational Requirements 154
The use of professional designations by estate agents 156
Inspections 156
Licensing of businesses Bill 160
Proposed changes to B-BBEE (Broad Based Black Economic Empowerment) 162
Proposed changes 162
Fraudulent BBBEE Certificates 162
The Financial Intelligence Centre Act 38 of 2001 and the Financial Intelligence Centre Amendment Act, 2008
Purpose of the Act
The objective of the Financial Intelligence Centre Act (FICA), 38 of 2001 is to establish a Financial Intelligence Centre and a Money Laundering Advisory Council in order to combat money laundering activities. The legislation aims to combat money laundering activities by getting “accountable institutions” to report suspect and unusual transactions that may be indicative of possible money laundering opportunities to the money laundering office.
FIC ACT aims to impose certain duties on institutions and other persons who might be used for money laundering purposes.
Definition of a money laundering activity
Any person who knows or should reasonably have known that property is or forms part of the proceeds of unlawful activities and:
Enters into any agreement or, engages in any arrangement or transaction with anyone in connection with that property whether the agreement, arrangement or transaction is legally enforceable or not or,
Performs any other Act in connection with such property whether it is performed independently or in concert (together) with any other person, which has or is likely to have the effect of:
○ Concealing or disguising the:
― Nature
― Source
― Location
― Disposition or
― Movement
of the property or its ownership or any interest which anyone may have in respect thereof, or:
Enabling or assisting any person who has committed or commits an offence in the Republic or elsewhere:
○ To avoid prosecution
○ To remove or diminish any property acquired directly or indirectly as a result of the commission of an offence.
You can be guilty of an offence not only when you know that the property forms part of an illegal activity but also which you should reasonably have known and you did not report it.
You do not have to be actively involved. The mere concealing or disguising of the source, location etc. constitutes an offence. If you assist someone who has committed an offence to avoid prosecution or remove the property directly or indirectly, you are again running a risk of conviction.
Any person who knows or should reasonably have known that another person has obtained the proceeds of unlawful activities and who enters into any agreement with anyone or engages in any agreement or transaction whereby:
The retention or the control by or on behalf of the other person of the proceeds of unlawful activities is facilitated, or
The proceeds of unlawful activities are used to make funds available to the other person or to acquire property on his/her behalf or to benefit him/her in any way shall be guilty of an offence.
Actual knowledge again is not required. You are deemed to know when you should reasonably have known. This clause is aimed at preventing assistance to someone who was engaged in illegal activities or entering into an agreement with such a person to make the funds available to purchase property on his/her behalf or to benefit him/her in any other way.
Any person who acquires, uses, or, has possession of, property and who knows or should have reasonably known that it is, or forms part of the proceeds of unlawful activities of another person shall be guilty of an offence.
Proceeds of an unlawful activity are defined as follows:
Any property, service, advantage, benefit reward
Which was derived, received, retained directly or indirectly, in the republic or elsewhere at any time before or after the commencement of the Act, in connection with or as a result of any unlawful activity carried on by any person, and includes any property representing property so derived.
An unlawful activity is defined as follows:
Conduct which constitutes a crime or which contravenes any law, whether such conduct occurred before or after the commencement of the Act and whether such conduct occurred in the Republic or elsewhere.
Meaning of knowledge of a fact:
The person who has actual knowledge of that fact or the Court is satisfied that the person believes that there is a reasonable possibility of the existence of the fact, and that the person fails to obtain information or confirm or refute the existence of the fact.
The Act says if the conclusions that he/she should have reached are those which would have been reached by a reasonably diligent and vigilant person having both the general knowledge, skill, training and experience that may reasonably be expected of a person in his/her position, and the general knowledge, skill, training and experience that he/she in fact has.
Money Laundering legislation in South Africa
The Prevention of Organised Crime Act (POCA) came into being in 1998.
This Act defines offences relating to proceeds of unlawful activities that are punishable. This includes money laundering, assisting another to benefit from the proceeds of unlawful activities and acquisition as well as possession or use of proceeds of unlawful activities.
As a result of international pressure, this legislation was clearly not enough to conform to world standards in combating money laundering. The Financial Intelligence Centre Act 2001 (FICA) was passed and needs to be read in conjunction with POCA.
The Financial Intelligence Centre (“FIC”)
The principal objective of the Centre is to assist in the identification of the proceeds of unlawful activities and the combating of money laundering activities.
The other objectives of the Centre are:
To make information collected by it, available to investigating authorities, supervisory bodies, the intelligence services and the South African Revenue Service to facilitate the administration and enforcement of the laws of the Republic;
To exchange information with bodies with similar objectives in other countries regarding money laundering activities, the financing of terrorist and related activities, and other similar activities;
To supervise and enforce compliance with this Act or any directive made in terms of this Act and to facilitate effective supervision and enforcement by supervisory bodies.
Money Laundering Control measures
The principal money laundering control measures as contained in the Act are:
Duty to identify clients (section 21);
Duty to keep records of transactions and business relationships (section 22);
Reporting cash transactions above a prescribed limit (section 28);
Reporting duties and access to information (section 29 and others);
Formulation and implementation of internal rules (section 42);
Training and compliance (section 43).
Duty to identify clients
An accountable institution is obligated to establish the identity of any prospective client before any business relationship is established with the client. This must be done even if only one transaction will be concluded with the client. This will include establishing the identity of a person on whose behalf the client may be acting. If any transactions have taken place before the FIC ACT took effect, the institution must trace all accounts at the institution that were involved in such a transaction.
A business relationship will be deemed to have been established if an arrangement exists with a view of concluding transactions on a regular basis.
In addition to establishing and verifying the identity of existing clients, accountable institutions will also be required to trace all accounts that they have that are involved in transactions concluded in the course of the business relationship with that client.
Board/senior management approval of an accountable institution’s anti-money laundering and terrorist financing policies and procedures.
Board of directors’/senior management’s approval of an accountable institution’s own internal policies and procedures to address money laundering and terrorist financing is critical if an accountable institution wishes to be considered serious about its appreciation of, and willingness to, mitigate money laundering and terrorist-financing risks in its daily operations.
The Centre therefore expects that the internal anti-money laundering and terrorist financing policies and procedures of an accountable institution should be adopted and approved by the board of directors of that accountable institution.
Risk-based approach
Accountable institutions are not required to follow a “one size fits all” approach in the methods that they use and the levels of verification that they apply.
Application of a risk-based approach to the verification of the relevant particulars implies that an accountable institution can accurately assess the risk involved. It also implies that an accountable institution can take an informed decision on the basis of its risk assessment as to the appropriate methods and levels of verification that should be applied in a given circumstance.
An accountable institution would need to document and make use of a risk framework. Such a risk framework should form part of the accountable institution’s internal policies and procedures.
Duty to keep records
This duty placed on accountable institutions must be performed as soon as a business relationship exists or a transaction has been concluded with a client. The details that should be included in the records are:
Identity of the client;
Where a client is acting on behalf of another person:
○ Identity of such a party; and
○ The client’s authority to act on behalf of another person.
The manner in which the identities were established;
The nature of the business relationship or transaction;