Complying with Changes in Legislation 2016

Complying with changes in legislation 2016
August 2016
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 2016

Contents

The Financial Intelligence Centre Act 38 of 2001 and the Financial Intelligence Centre Amendment Act, 2008 6

What is money laundering? 6

What is terror financing? 6

Accountable institutions 6

Reporting institutions 7

Supervisory bodies 8

Beneficial owner 8

Business relationship 8

Non-compliance 8

Domestic prominent influential person 9

Executive officer 10

Definition of a trust 10

Increased powers of the FIC 10

Reporting a suspicious and unusual transaction report 10

Cash Threshold Reporting (CTR) 11

Identification of clients and other persons 12

Obligation to keep customer due diligence records 15

Obligation to keep transaction records 16

Period for which records must be kept 16

Notification of persons and entities identified by Security Council of the United Nations 16

Prohibitions relating to persons and entities identified by Security Council of the United Nations 16

Permitted financial services and dealing with property 17

Reporting obligations to advise Centre of clients 17

Property associated with terrorist and related activities 18

Access to information held by Centre 18

Risk Management and Compliance Programs 19

Governance of AML and CFT compliance 19

Training relating to AML and CFT compliance 19

Inspections 19

Administrative sanctions 21

Offence provisions 21

Jurisdictions with strategic deficiencies in their measures against money laundering and terror financing 22

Prevention of Organised Crime Act – Schedule 1 Amendment 22

Statistics 23

The National Credit Act No 34 of 2005 27

Overview of the Act 27

Interpretation, Purpose and Application 27

Consumer Credit Industry Regulation 30

Credit bureau information 32

Consumer Credit Agreements 37

Compliance and Reporting 42

Consumer Protection Act 48

Application of the Consumer Protection Act 48

Consumer Goods and Services Ombud 48

Who must register? 48

Registration fees and annual levies 49

Fees payable by participant 49

What is a complaint? 49

Who can complain? 49

When will the CGSO not consider a complaint? 50

How to lay a compliant? 50

Complaint resolution by the participant 51

Withdrawing of a complaint by the consumer 51

What can a consumer complain about? 51

Consequences of failure to co-operate with the Ombudsman 52

Protection of Personal Information Act No. 4 of 2013 53

Introduction 53

Purpose of the Act 53

Application of the Act 53

Different types of personal information 53

The different role players 54

Accountability 55

Processing limitation 55

Purpose specification 57

Further processing limitation 58

Openness 59

Security safeguards 61

Data subject participation 63

Penalties 65

Employment Law 66

Employment Services Act 4 of 2014 66

Company Secretarial 68

Removal of Director 68

Rotation of auditors (section 92) 68

Disclosure of Directors’ / Prescribed Officers’ Remuneration 69

Annual returns 72

Independent reviews and non-compliance with regulation 29 77

Forthcoming attractions 79

King IV 84

Unemployment Insurance Amendment Bill version B 2015 86

Other important notices 88

Estate Agents – CPD Update 88

Special Voluntary Disclosure Programme in respect of offshore assets and income 88

The Financial Intelligence Centre Act 38 of 2001 and the Financial Intelligence Centre Amendment Act, 2008

What is money laundering?

Money Laundering is the process used by criminals to hide, conceal or disguise the nature, source, location, disposition or movement of the proceeds of unlawful activities or any interest which anyone has in such proceeds.

Criminals who have generated an income from their criminal activities usually follow three common stages to launder their money. The first stage is commonly referred to as ‘placement’. This is when criminals introduce their illegally derived proceeds into legitimate financial systems. An example of this would be splitting a large portion of cash into smaller sums and thereafter depositing the smaller amounts into a bank account, or purchasing a series of monetary instruments (cheques, money orders, etc.) with the smaller amounts.

The second stage is called ‘layering’. During this stage the launderer engages in a series of transactions, conversions or movements of the funds in order to cloud the trail of the funds and separate them from their illegitimate source. The funds might be channeled through various means for example; the purchase and sale of investment instruments, purchasing property and selling it soon after, or the launderer might simply wire the funds through a series of accounts at various banks across the globe.

Although use of all three stages is common, it is not always utilised by the criminal who wishes to launder funds. In some instances, criminals may choose to merely ‘place’ the illegally derived funds into the economy by merely depositing the money into his or her bank account, without any layering occurring. They can withdraw the money and spend it at their will.

What is terror financing?

Financing of terrorism is the collection or provision of funds for the purpose of enhancing the ability of an entity or anyone who is involved in terrorism or related activities to commit an act that is regarded as a terrorist act. Funds may be raised from legitimate sources, such as personal donations and profits from businesses and charitable organisations, as well as from criminal sources, such as the drug trade, the smuggling of weapons and other goods, fraud, kidnapping and extortion.

Accountable institutions

The term “accountable institution” is defined as a person referred to in Schedule 1 of the FIC Act. Thus a person or organisation that carries on the business of any entity listed in Schedule 1 of the Act would be regarded as an accountable institution.

Schedule 1 – List of accountable institutions

  A practitioner who practices as defined in section 1 of the Attorneys Act, 1979 (Act 53 of 1979).

  A board of executors or a trust company or any other person that invests, keeps in safe custody, controls or administers trust property within the meaning of the Trust Property Control Act, 1988 (Act 57 of 1988).

  An estate agent as defined in the Estate Agency Affairs Act, 1976 (Act 112 of 1976).

  An authorised user of an exchange as defined in the Securities Services Act, 2004 (Act 36 of 2004).

  A manager registered in terms of the Collective Investment Schemes Control Act, 2002 (Act 45 of 2002), but excludes managers who only conduct business in Part 6 of the Collective Investment Schemes Control Act (Act 45 of 2002).

  A person who carries on the business of a bank as defined in the Banks Act, 1990 (Act 94 of 1990).

  A mutual bank as defined in the Mutual Banks Act, 1993 (Act 124 of 1993).

  A person who carries on a long-term insurance business as defined in the Long-Term Insurance Act, 1998 (Act 52 of 1998).

  A person who carries on the business of making available a gambling activity as contemplated in section 3 of the National Gambling Act, 2004 (Act 7 of 2004) in respect of which a license is required to be issued by the National Gambling Board or a provincial licensing authority.

  A person who carries on the business of dealing in foreign exchange.

  A person who carries on the business of lending money against the security of securities.

  A person who carries on the business of a financial service provider requiring authorisation in terms of the Financial Advisory and Intermediary Services Act, 2002 (Act 37 of 2002), to provide advice and intermediary services in respect of the investment of any financial product (but excluding a short term insurance contract or policy referred to in the Short-term Insurance Act, 1998 (Act 53 of 1998) and a health service benefit provided by a medical scheme as defined in section 1(1) of the Medical Schemes Act, 1998 (Act 131 of 1998)).

  A person, who issues, sells or redeems travelers’ cheques, money orders or similar instruments.

  The Postbank referred to in section 51 of the Postal Services Act, 1998 (Act 124 of 1998).

  The Ithala Development Finance Corporation Limited.

  A person who carries on the business of a money remitter.

Reporting institutions

A reporting institution refers to a person referred to in Schedule 3 of the FIC Act, and could be either a motor vehicle dealer or a Kruger Rand dealer.

Schedule 3 – List of reporting institutions

  A person who carries on the business of dealing in motor vehicles

―  The Financial Intelligence Centre (FIC) has revised Public Compliance Communication 07 (PCC07) to explain the duties of a motor vehicle dealer when reporting cash transactions of more than R24 999.99 to the FIC.

―  The requirement takes effect on the 3 March 2016.

―  A motor vehicle dealer’s duty to report cash transactions to the FIC also includes motor vehicle related services provided by the motor vehicle dealer and the buying and selling of motor vehicle parts.

―  The Centre views a “person who carries on the business of dealing in motor vehicles” to be any person who is engaged in the business of buying, selling, or exchanging any new and second-hand self-propelled vehicle, including a vehicle having pedals and an engine, or an electric motor as an integral part thereof or attached thereto and which is designed or adapted to be propelled by these means on land, as well as any trailer and caravan.

―  This includes persons dealing in both new and second hand vehicles.

  A person who carries on the business of dealing in Kruger Rands.

―  The Financial Intelligence Centre (FIC) views “a person who carries on the business of dealing in Kruger rands” to be any person who, as a regular feature of his/her business, deals in jewellery, ornaments, watches or other objects that contain Kruger Rands irrespective of the value of the turnover of the Kruger rand dealer.

―  Some businesses including jewellers are buying Kruger Rands and using these Kruger Rands to manufacture jewellery, ornaments and watches that contain the original Kruger Rands.

―  The inclusion of a Kruger Rand in another object such as a piece of jewellery, ornament, watches etc. does not alter the intrinsic nature of the Kruger rand.

Supervisory bodies

  The Financial Service Board established by the Financial Service Board Act, 1990 (Act 97 of 1990).

  The South African Reserve Bank in respect of the powers and duties contemplated in section 10(1)(c) in the South African Reserve Bank Act, 1989, (Act 90 of 1989) and the Registrar as defined in sections 3 and 4 of the Banks Act, 1990, (Act 94 of 1990) and the Financial Surveillance Department in terms of Regulation 22E of the Exchange Control Regulations, 1961.

  The Estate Agency Affairs Board established in terms of the Estate Agency Affairs Act , 1976 (Act 112 of 1976).

  The Independent Regulatory Board for Auditors established in terms of the Auditing Profession Act , 2005 (Act 26 of 2005).

  The National Gambling Board established in terms of the National Gambling Act and retained in terms of the National Gambling Act, 2004 (Act 7 of 2004).

  A law society as contemplated in section 56 of the Attorneys Act, 1979 (Act 53 of 1979).

  A provincial licensing authority as defined in section 1 the National Gambling Act, 2004 (Act 7 of 2004).

Beneficial owner

‘Beneficial owner’, in respect of a legal person, means a natural person who, independently or together with another person, directly or indirectly:

  Owns the legal person;

  Exercises effective control of the legal person.

Business relationship

The definition of "business relationship" is amended to include in the meaning of business relationship three or more single transactions that appear to be linked to the same person using the same product or service at regular intervals. This definition has been amended, so that accountable institutions will not be required to repeatedly identify and verify customers who regularly conclude single transactions with the same accountable institution.

Non-compliance

The definition of "non-compliance" is amended, to make a distinction between what constitutes non-compliance that attracts an administrative sanction from non-compliance that is subject to a criminal sanction.

Domestic prominent influential person

“Domestic prominent influential person” means an individual who holds, including in an acting position for a period exceeding six months, or has held at any time in the preceding 12 months, in the Republic:

  A prominent public function including that of:

―  The President or a Deputy President;

―  A Minister or Deputy Minister;

―  The Premier of a province;

―  A member of the Executive Council of a province;

―  An executive mayor of a municipality as elected in terms of the Local Government: Municipal Structures Act, 1998 (Act No. 117 of 1998);

―  A leader of a political party registered in terms of the Electoral Commission Act, 1996 (Act No. 51 of 1996);

―  A member of a royal family or senior traditional leader defined in the Traditional Leadership and Governance Framework Act, 2003 (Act No. 41 of 2003);

―  A head or chief financial officer of a national or provincial department or government component, defined in section 1 of the Public Service Act, 1994 (Proclamation No. 103 of 1994);

―  A municipal manager appointed in terms of section 82(1) of the Local Government: Municipal Structures Act, 1998 (Act No. 111 of 1998);

―  The chairperson of the controlling body, Chief Executive Officer, Chief Financial Officer or Chief Investment Officer of:

n  A public entity listed in Schedule 2, or Part B or D of Schedule 3, to the Public Finance Management Act, 1999 (Act No. 1 of 1999); or

n  A municipal entity defined in section 1 of the Local Government: Municipal Systems Act, 2000 (Act No. 32 of 2000);

―  A constitutional court judge or any other judge defined in section 1 of the Judges’ Remuneration and Conditions of Employment Act, 2001 (Act No. 47 of 2001);

―  An ambassador or high commissioner or other senior representative of a foreign Government based in the Republic;