FAQ – FIC

Frequently asked questions

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.

Category: Money laundering and terrorist financing

How is money laundered?

Criminals who have generated an income or proceeds from their criminal activities usually follow three stages to launder their money. The first stage is 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 channelled through various means for example the purchase and sale of investment instruments, purchasing property and selling it soon after. The launderer could simply wire the funds through a series of accounts to various banks across the globe.

The third stage is ‘integration’. This generally ensues the successful stages of placement and layering. The launderer at this stage causes the funds to re-enter the economy and appear to be legitimate. The launderer might choose to invest the funds into real estate, luxury assets, or business ventures.

Although use of all three stages is common, it is not always used by the criminal who wishes to launder funds. In some instances, criminals may choose to ‘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.

Category: Money laundering and terrorist financing

What is terrorist 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 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.

Category: Money laundering and terrorist financing

Why should I register with the FIC?

Registration with the FIC is a regulatory obligation in terms of the FIC Act. If your business or sector is listed in Schedule 1 of the FIC Act then you are required to register with the FIC. Registration with the FIC is the first step to enable accountable institutions to submit regulatory reports and fulfil other FIC Act compliance obligations.

Section 43B of the FIC Act, requires accountable institutions to be registered with the FIC. Such registration includes providing the FIC with the details of the compliance officer and the institution’s information. The failure to register with the FIC or update registration information when it has changed are offences and may result in a fine not exceeding R10 million.

Category: Compliance and supervision / Registering with the FIC

When should I register with the FIC?

Persons who start new businesses which are regarded as accountable institutions are required to register with the FIC within 90 days from the date the business commenced.

Category: Compliance and supervision / Registering with the FIC

How do I register with the FIC?

All registrations must be completed and submitted to the FIC electronically within the prescribed period using the FIC’s online registration and reporting system called goAML. Registration with the FIC is free. In exceptional circumstances an accountable institution may make use of a manual paper-based mechanism to register.

For further reading on registration please refer to Guidance Note 7 and PCC 5C. Please refer to the User Guide for registering as an accountable institution.

Category: Compliance and supervision / Registering with the FIC

What is an accountable institution?

An accountable institution is defined as a person, or an organisation referred to and listed in Schedule 1 of the FIC Act that carries on the business of any entity. Accountable institutions must fulfil certain obligations in terms of the FIC Act.

Category: Compliance and supervision / Registering with the FIC

What is a supervisory body?

A supervisory body is a functionary or institution referred to in Schedule 2 of the FIC Act. Supervisory bodies are responsible for ensuring that the accountable institutions in their particular businesses sectors comply with FIC Act requirements. For example, the Prudential Authority of the South African Reserve Bank is the supervisory body for the banking sector.

The FIC oversees and enforces FIC Act compliance among non-financial sectors including trust and company services providers, legal practitioners, high-value goods dealers, SA Mint Company, crypto asset service providers, and the financial sector in respect of credit providers. The FIC also conducts inspections and enforces compliance where no supervisory body exists.

The Financial Sector Conduct Authority (FSCA) and the South African Reserve Bank are responsible for supervising the following sectors:

FSCA: Authorised users of an exchange; collective investment schemes managers and financial services providers.

The Prudential Authority of the (SARB) is responsible for supervising the banking sector, mutual banks, co-operative banks, life insurers, money or value transfer providers and clearing system participants. SARB’s Financial Surveillance department is responsible for supervising of foreign exchange dealers, sellers or redeemers of travellers’ cheques and clearing system participants.

Category: Compliance and supervision / Registering with the FIC

If your business does not receive cash, do you still need to register with the FIC?

The cash threshold reporting obligation and the registration obligation should not be confused. Registering with the FIC is a legal obligation, and even though you may not receive cash, if your sector is listed in Schedule 1 of the FIC Act, you are required to register as an accountable institution.

Category: Compliance and supervision / Registering with the FIC

Are there penalties associated with the failure to register

In terms of section 61A of the FIC Act a failure to register is an offence and subject to a fine not exceeding R10 million or imprisonment for a period of up to five years.

Alternatively, the FIC may also, in terms of section 45C (1) of the FIC Act, impose an administrative sanction for a failure to comply with any provision of the FIC Act, including a failure to register.

Category: Compliance and supervision / Registering with the FIC

Are guidance notes issued by the FIC enforceable in terms of law?

The FIC’s guidelines cannot impose new obligations or detract from existing obligations. The guidance notes are issued to provide guidance on existing obligations and requirements contained in the FIC Act and Regulations. The guidelines are therefore not enforceable in law, but they do prescribe an acceptable standard to indicate the level of effort expected of responsible institutions, to comply with the provisions of the FIC Act. The primary purpose is to provide guidance to institutions on how they can perform their duties and comply with their FIC Act obligations.

Category: Compliance and supervision / Registering with the FIC

Does the FIC endorse any training products?

The FIC assists the various sectors in meeting their obligations and may be consulted to view material compiled by individuals and consultancies. However, the FIC has not endorsed and does not endorse any training product, software product and information and communications technology (ICT) processes or any services purported to be used for FIC Act compliance.

Category: Compliance and supervision / Registering with the FIC

What are my reporting obligations?

There are three main regulatory reporting streams for accountable institutions:

Cash threshold reports (CTR) – on transactions i.e. cash received or issued – exceeding R49 999.99. The threshold was recently increased by an amendment to the FIC Act. Refer to Guidance Note 5C.

Suspicious and unusual transaction reports – on transactions that are unusual or arouse suspicion in terms of money laundering or terrorist financing activities. Depending on whether the transaction is completed or incomplete you would submit a suspicious transaction report (STR) or a suspicious activity report (SAR). These reports are subjective in the eyes of the reporting institution. Please refer to Guidance Note 4B.

Terrorist property report (TPR) – this is where there is a match with one of the parties to the transaction to the targeted financial sanctions (TFS) list or United Nations Security Council Resolution 1267 list. This is factual reporting. Refer to Guidance Note 6A.

Category: Compliance and supervision / Reporting to the FIC

Who should report suspicious and unusual transactions?

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, and who suspects money laundering or a terrorist financing activity or unusual transaction, to report this to the FIC.

Category: Compliance and supervision / Suspicious and unusual transaction reporting

What can be deemed a suspicious and unusual transaction?

A suspicious transaction will often be one when the transaction raises questions or gives rise to discomfort, apprehension or mistrust. When considering whether there is reason to be suspicious of a particular situation one should assess all the known circumstances relating to that situation. This includes the normal business practises and systems within the industry where the situation arises.

A suspicious situation may involve several factors that may on their own seem insignificant, but taken together, may raise suspicion concerning that situation. The context, in which a situation arises, therefore, is a significant factor in assessing suspicion. This will vary from business to business and from one customer to another. The FIC has issued Guidance Note 4B on reporting suspicious and unusual transactions to the FIC.

Category: Compliance and supervision / Suspicious and unusual transaction reporting

When does one need to report a suspicious transaction?

An accountable institution must file a report if they suspect that:

The business in which they are involved has received or is about to receive the proceeds of any unlawful activity

A transaction or series of transactions in which your business is involved has facilitated or is likely to facilitate the transfer of proceeds of unlawful activities from one person to another or from one location to another

A transaction or series of transactions in which your business is involved has no apparent business or lawful purpose

A transaction or series of transactions in which your business is involved is conducted to avoid giving rise to a reporting duty under the FIC Act

A transaction or series of transactions in which your business is involved may be of interest to the South African Revenue Service in a possible investigation of tax evasion

The business in which you are involved has been used or is about to be used in any way to hide or disguise the proceeds of unlawful activities

Category: Compliance and supervision / Suspicious and unusual transaction reporting

How does one report a suspicious transaction to the FIC?

A report must be filed electronically via the reporting platform available on the FIC’s website. In exceptional cases where a person does not have the technical capability to make a report electronically, that person may post it to Private Bag X 177, Centurion 0046.

Category: Compliance and supervision / Suspicious and unusual transaction reporting

What is the period for reporting a suspicious transaction?

A report made under section 29 of the FIC Act must be sent to the FIC as soon as possible, but not later than 15 days, excluding Saturdays, Sundays and public holidays, after a natural person or any of his or her employees, or any of the employees or officers of a legal person or other entity, has become aware of a fact concerning a transaction on the basis of which knowledge or a suspicion concerning the transaction must be reported. In exceptional cases the FIC may approve of the report being sent after the expiry of this period.

Category: Compliance and supervision / Suspicious and unusual transaction reporting

What happens if an accountable institution does not submit an STR to the FIC?

Failure to submit an STR to the FIC could lead to imprisonment for a period not exceeding 15 years or to a fine not exceeding R100 million.

Category: Compliance and supervision / Suspicious and unusual transaction reporting

Can an institution continue transacting with a client after a suspicious and unusual transaction report has been made?

The general rule is that a person may continue with a transaction from which a report emanates. However, section 34 of the FIC Act empowers the FIC to intervene in certain transactions after consulting with an accountable institution or person required to make a report. In such instances the accountable institution or person in question may not proceed with the carrying out of the transaction. The FIC’s intervention is valid for a maximum period of five days and is aimed at creating an opportunity for the FIC to make the necessary enquiries and to inform and advise an investigating authority.

Category: Compliance and supervision / Suspicious and unusual transaction reporting

Is the reporter's identity protected?

Section 38 of the FIC Act provides for a broad range of measures to protect persons who participate in submitting reports to the FIC. It guarantees that “no action, whether criminal or civil, can be instituted against any natural or legal person who complies in good faith with the reporting obligations of the FIC Act”. Consequently, they cannot be forced to give evidence concerning such a report in criminal proceedings arising from the report. However, such a person may choose to do so voluntarily. If a person who participated in submitting a report to the FIC elects not to testify, no evidence regarding that person’s identity is admissible as evidence in criminal proceedings.

Category: Compliance and supervision / Suspicious and unusual transaction reporting

What is a cash threshold report (CTR)?

Section 28 of the FIC Act requires all accountable institutions to report cash transactions above the prescribed limit to the FIC. Accountable institutions must report cash transactions of more than R49 999.99.

Physical cash payments more than the threshold amount received by the affected accountable institution must be reported. Where an affected accountable institution pays a client physical cash (notes, coins or travellers’ cheques) to value of R50 000 or more, this has to be reported to the FIC. Refer to Guidance Note 5C.