Adhering to FICA Regulations in South Africa: Maintaining Compliance in 2024
Strengthening South Africa's Anti-Money Laundering Framework
South Africa is taking significant steps to bolster its anti-money laundering (AML) measures, with the focus on enhancing customer due diligence (CDD) and increasing regulatory oversight. The amendments to the Financial Intelligence Centre Act (FICA) aim to address 20 of the 22 deficiencies identified by the Financial Action Task Force (FATF) and improve the country's AML framework by late 2025 and into 2026.
One of the key updates to FICA is the strengthening of CDD requirements. The General Laws Amendment Act has introduced reforms to better identify and prevent illicit financial flows. This includes improved transparency related to beneficial ownership, helping to pierce through corporate and trust structures used to hide illicit funds.
Another significant change is the inclusion and regulation of Trust and Company Service Providers (TCSPs), which are often vulnerable to abuse for money laundering and terrorist financing. TCSPs must now conduct customer due diligence, keep transaction records, report suspicious transactions, and implement AML, CFT, and CPF risk management and compliance programs.
New provisions also enforce strict implementation of UN-mandated financial sanctions, requiring accountable institutions to identify and not transact with sanctioned persons or entities linked to terrorism or proliferation financing.
In addition, there has been a 40% increase in compliance with anti-money laundering requirements, linked to stricter due diligence, higher suspicious transaction reporting, and intensified enforcement by the Financial Intelligence Centre (FIC), National Prosecuting Authority, and Reserve Bank.
FICA is an essential element of the AML system in South Africa, outlining requirements for companies to confront money laundering activities and granting the Financial Intelligence Center (FIC) the ability to oversee affected companies. Companies regulated under FICA include banks, casinos, exchange companies, brokers, attorneys, insurance companies, financial advisers, real estate agents, investment firms, dealers of precious metals, payment service providers, and more.
To successfully register and operate in South Africa, companies must implement AML measures such as appointing a Money Laundering Reporting Officer (MLRO), providing internal training, conducting a risk assessment, establishing CDD, SDD, and EDD procedures, screening for persons on sanction lists and PEPs lists, transaction monitoring, ongoing monitoring of customer behavior and transactions, recordkeeping, and reporting suspicious activity.
FICA adopts a risk-based approach, meaning that the extent of a given verification measure should fit the risk level of the client. Records must be kept for five years after the end of the relationship or last transaction. Failure to submit a Suspicious Transaction Report (STR) or Cash Threshold Report (CTR) may result in financial penalties not exceeding R100 million (approximately $5.2 million) or imprisonment for up to 15 years.
Companies in South Africa must also monitor customers' actions during the customer lifecycle to identify inconsistencies with pre-established patterns. These measures are in place to tackle money laundering, terrorism financing, fraud, and tax evasion, reflecting South Africa’s commitment to aligning with international AML standards and FATF recommendations.
In the context of strengthening South Africa's Anti-Money Laundering Framework, businesses are required to implement customer due diligence measures, as part of the amendments made to the Financial Intelligence Centre Act (FICA). This includes regulating Trust and Company Service Providers (TCSPs) to conduct customer due diligence and implement Anti-Money Laundering (AML), Countering Financing of Terrorism (CFT), and Counter Proliferation Financing (CPF) risk management and compliance programs. Moreover, all companies operating in South Africa, such as banks, insurance companies, and real estate agents, must comply with stringent AML measures outlined in FICA, including appointing a Money Laundering Reporting Officer (MLRO) and conducting regular suspicious transaction reporting.
