Presentation

• 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

• 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

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.

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);

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

Inter-Governmental Body consisting of 33 members

• 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

CORE INSTITUTIONAL STAKEHOLDERS

FIC “Value – Add” Chain

AML/ CFT ARCHITECTURE

SUPERVISORY BODIES

Ministries Departments and Supervisors responsible for oversight of sectors

LAW ENFORCEMENT AUTHORITIES

REPORTING & FEEDBACK

3. THE FINANCIAL INTELLIGENCE CENTRE

• The FIC’s legal obligations, location and accountability

• Responsibilities

• Structure

• Past Financial Year

• Future

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.

Core responsibilities for the Centre include that it:

• 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;

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

4. Annual Report 2006/07

21 466 suspicious transaction reports received.

• 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.

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

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).

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.

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.

• THANK YOU

• Murray Michell

• Director: Financial Intelligence Centre

• 012 – 3099200

• www.fic.gov.za

• [e-mail]