Pressure is mounting on South Africa to enact the Financial Intelligence Centre Amendment Bill before the June 2017 meeting of the international Financial Action Task Force.
“The task force, which sets global standards for combating money laundering and terrorist financing, has already raised concerns about enacting the FICA Bill,” says Kirsten Serrurier, Bowmans Banking and Financial Services Regulatory Lawyer.
“The task force has decided against issuing a public statement questioning South Africa’s compliance with a number of international standards until its next meeting in June. The implication is there is some pressure to expedite the enactment of the Bill before that meeting,” she says.
The FICA Bill, which seeks to place greater scrutiny on the affairs of politically influential people, was unanimously adopted by the National Assembly on 28 February 2017 and is now awaiting Presidential signature.
“Despite being passed unanimously, the Bill has not been without controversy,” says Serrurier.
“The enhanced scrutiny it requires from financial institutions in South Africa includes reasonably establishing the source of wealth and funds of clients, procuring the approval of senior management for the establishment of business relationships and continually monitoring those relationships.”
This is in line with the Financial Action Task Team’s standards, with which South Africa is obliged to comply. Failing to comply could erode the credibility of the country’s financial regulatory system and result in an increase in transaction costs.
Causes of the delays with the Bill
The National Treasury initially tabled the FICA Bill in April 2015 and Parliament passed it in May 2016. However, in November 2016, President Jacob Zuma referred the Bill back to the National Assembly for review, raising a number of concerns, says Serrurier.
“One of the issues raised was around the constitutionality of the provisions relating to warrantless searches. Concerns were raised about whether and to what extent they unjustifiably limit the right to privacy and, therefore, whether they were unconstitutional.”
According to independent legal opinion that was obtained, the warrantless searches in the FICA Bill were not necessarily unconstitutional. “Nevertheless, Treasury officials revisited the Bill and proposed amendments that would tighten restrictions on the conduct of warrantless searches,” she says. “The amendments now clarify that warrantless searches are for the purposes of compliance only and are not permitted in the course of criminal investigations.”
More detail has also been added as to when and how warrantless searches are permitted. For example, an inspector from the Financial Intelligence Centre without a warrant may only enter a private residence with the consent of the occupant or the person controlling business done on the premises.
“It was further emphasised in the Parliamentary debates that the Bill does not grant the Financial Intelligence Centre and its inspectors the investigative or criminal powers reserved for the South African Police Service and the National Prosecuting Authority,” says Serrurier.
“The FICA Bill is important in bolstering the fight against global financial crime and improving the integrity of South Africa’s banking system,” says Serrurier.
“With only two months to go before the Financial Action Task Team meets, it is to be hoped that the Bill’s signing into law is imminent.”