FINANCIAL INTELLIGENCE CENTRE BILL 2001

FINANCIAL INTELLIGENCE CENTRE BILL 2001

INTRODUCTION

The Financial Intelligence Centre Bill (FIC Bill) is essentially the product of the Task Team on Money Laundering appointed by the Minster of Finance.

Task Team mandated to:

• review the draft Bill prepared by the South African Law Commission in August 1996;

• consult with institutions which need to implement the legislation;


INTRODUCTION

• ensure legislation is appropriate to SA circumstances;

• make recommendations on institutional framework for effective implementation.

The Bill was further refined by discussions between Deputy Ministers Finance and Justice, and

extensive discussions with key government departments and agencies as directed by Cabinet, before approval in 2000.


WHAT IS MONEY LAUNDERING

Process that obscures the illicit nature/origin of the proceeds of crime.

The term “money laundering” coined by American law enforcement officials.

Popularised during the the US Watergate inquiry in the mid-1970’s.


THE MONEY LAUNDERING PROCESS:

Placement stage: the proceeds of crime enter the financial system.

Layering stage: the separation of the illicit proceedings from their original criminal source.

Integration stage: split amounts are amassed and placed under the control of the criminal as apparently legitimate business funds.


THE COSTS OF MONEY LAUNDERING: IMF estimates aggregate size of money laundering in the world

between two and five percent of the world’s gross domestic product.

Using 1996 statistics, value of money laundering ranged between US Dollar (USD) 590 billion and USD 1.5 trillion.

Lower figure equal to nominal total output of an economy the size of Spain.


MONEY LAUNDERING LEGISLATION IN SOUTH AFRICA

SA taken a very tough stand against money laundering.

In 1992, the Drugs and Drug Trafficking Act, Act No 140, was promulgated and:

criminalised the laundering of proceeds of specific drug-related offences;

required the reporting of suspicious transactions involving the proceeds of drug-related offences.



1996: The Proceeds of Crime Act, Act No 76, criminalised generally the laundering of proceeds of any type of offence.

Created a general reporting obligation for businesses acquiring suspicious property;

Allowed the freezing and confiscation of the proceeds of crime.

1998: The Prevention of Organised Crime Act, Act No 121 (POCA), repealed the Proceeds of Crime Act and the money laundering provisions of Drugs and Drugs Trafficking Act.



POCA specifically criminalised money laundering;

POCA provides for general reporting obligation for businesses acquiring suspicious property;

NDPP may obtain information from any state body for investigations under POCA;

POCA provides for co-operation between investigators and Commissioner of SARS.



2001: Financial Intelligence Centre Bill proposes to complement POCA, by:

introducing mechanisms & measures to prevent & combat money-laundering activities;

establishing an anti-money laundering regulatory regime to encourage voluntary compliance and self-regulation by institutions;

establishing a Financial Intelligence Centre (“the Centre”);

establishing Money Laundering Advisory Council to advise Minister.


NATURE OF THE FINANCIAL INTELLIGENCE CENTRE

Not an investigative body;

but repository of financial intelligence (data) regarding financial transactions.

Co-ordination Centre of decentralised but integrated anti-money laundering regime;

To co-ordinate policy and efforts to counter money-laundering activities.


LEGAL STRUCTURE, LOCATION AND ACCOUNTABILITY CENTRE

Juristic person;

Located outside the public service but within the public administration in terms of section 195 of Constitution.

Accountable to Minister of Finance.

Funded mainly from national budget.


FUNCTIONS OF THE CENTRE

To collect, process, analyse and interpret information;

Inform, advise and cooperate with investigating authorities and the intelligence services;

Supervise and regulate compliance by accountable institutions;

Give guidance to accountable institutions on combating money-laundering

Promote the appointment of persons to specialise in measures to detect and counter money-laundering activities.


HEAD OF THE CENTRE: DIRECTOR

Appointed by Minister after consultation with Money Laundering Advisory Council;

For period of five years subject to performance contract and the policy and security directions of Minister;

Director is chief executive officer and accounting authority of Centre;

Responsible for performance by Centre of its functions and empowered to take all decisions for the Centre;

Director may delegate powers and duties.


STAFFING OF THE CENTRE

Director will determine and appoint staff establishment within policy framework determined by Minister;

May appoint seconded personnel to staff;

includes employees of state organs by agreement with Centre;

All staff, included seconded persons, to perform duties under control and directions of the Director;


ACCESSING THE INFORMATION OF CENTRE

Information held by Centre is confidential;

confidential information is protected and disclosure permitted in limited circumstances;

Access to information to limited classes of persons upon request in writing;

must specify the desired information and purpose for which required;

Investigating authority inside SA and intelligence services have access;


SUPERVISORY BODIES

Bill applies to supervisory bodies as listed in Schedule 2;

Minister may amend list of supervisory bodies after consulting the Council and Centre;

Supervisory bodies obliged to report accountable institutions to the Centre;

Supervisory bodies obliged to retain records relating to the report;

Officials or employees guilty of offence if they fail to report suspicion or to comply with request of the Centre.


MONEY LAUNDERING ADVISORY COUNCIL (“COUNCIL”)

Bill establishes Money Laundering Advisory Council to advise Minister.

Advice on policies and measures to combat money laundering.

Forum for the Centre, accountable institutions and supervisory bodies.

Expression of partnership between government and private sector.

Composed of representatives of all role players.

Treasury to provide administrative support.


ACCOUNTABLE INSTITUTIONS

Accountable institutions: institutions vulnerable to money-laundering.

Bill applies to all accountable institutions as listed in Schedule 1.

Minister empowered to add and remove institutions or to exempt accountable institutions or certain kinds of transactions.

Required to implement internal administrative systems to keep detailed

records of their customers and to report suspicious cash transactions. Must train their employees to recognize and deal with suspicious

transactions.


MONEY LAUNDERING CONTROL MEASURES

Accountable institutions are required to:

Know and identify their clients;

Keep records relating to business relationships and transactions.

Report cash transactions above prescribed limit to be set;

Report suspicious transactions;

Report electronic transfers and cash conveyance to and from Republic.


ENFORCEMENT

Relies primarily on compliance and self-regulation by accountable institutions;

FIC empowered to conduct administrative proceedings by inquiry;

FIC may make findings and order forfeiture of deposit placed with Center;

Monies forfeited are paid into the National Revenue Fund.

FIC may impose administrative and penal sanctions in appropriate circumstances;


REGULATIONS AND INDEMNITY

Minister authorised to make regulations.

May differentiate between different accountable institutions and different kinds of transactions.

Minister, the Centre and employees and other representatives of the Centre are indemnified from liability

provided acts in good faith in furthering the objects of the Act.


RELATIONSHIP WITH POCA

Bill inserts a new offence in POCA of “smurfing” or “structuring” transactions to avoid anti-money laundering reporting requirements.

Bill exempts accountable institutions from the provisions of section 7 of POCA in respect of matters which must be reported in terms of this Act;

Ministry envisages application of initial dual reporting mechanism based on 80/20 principle focussing on accountable institutions;

Over time as FIC evolves, remaining suspicious reporting will move from POCA to FIC.


SCHEDULES

Schedule 1 lists the accountable institutions; and

Schedule 2 lists the supervisory bodies to which the Act will apply.

LEGISLATIVE PROCEDURE

Bill deals with administration of justice, therefore procedure set out in section 75 of Constitution should apply.

FINANCIAL INTELLIGENCE CENTRE BILL 2001

Documents

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