Last Updated: 04/04/2012
CENTRAL AUTHORITY FOR REPORTING
Financial Intelligence Centre (FIC). The Financial Intelligence Centre Act 38 of 2001 (“FICA”) designates certain statutory bodies and functionaries as ‘supervisory bodies’ and requires them to report suspicious transactions conducted by the institutions which they oversee. Each supervisory body is responsible for supervising compliance with the provisions of Chapter 3 of FICA by the accountable institutions regulated by it.
The Law Society of South Africa ("LSSA") has been designated as the attorneys' supervisory body.
OTHER ANTI-MONEY LAUNDERING REGULATOR(S)
ARE LAWYERS COVERED BY ANTI-MONEY LAUNDERING LEGISLATION?
Lawyers are regarded as accountable institutions under Schedule 1 of the Financial Intelligence Centre Act 38 of 2001 ("FICA"), and as such are subject to duties imposed by that Act on accountable institutions.
Lawyers are also subject to:
LIST THE LAWS REGARDING ANTI-MONEY LAUNDERING, INDICATING WHICH LAWS ARE APPLICABLE TO LAWYERS.
ARE VISITING LAWYERS SUBJECT TO LOCAL LAWS REGARDING ANTI-MONEY LAUNDERING, AND, IF SO, TO WHAT EXTENT?
Any visiting attorney committing any of the offences contemplated in POCA, PRECCA and POCDATARA, shall, if convicted, be liable to fines or to imprisonment.
Visiting attorneys will not be regarded as accountable institutions for the purposes of FICA, but if they should commit any of the other offences contemplated in FICA, such attorneys shall, if convicted, be liable to fines or to imprisonment.
LIST ANY MONEY LAUNDERING GUIDANCE FOR LAWYERS (FOR EXAMPLE, LAW SOCIETY OR BAR ASSOCIATION GUIDELINES) CURRENTLY IN PLACE.
The LSSA has published a manual available on its website which may provide some guidance. It is not an official document and is not to be regarded as guidance issued under FICA.
The FICA guidance notes 1, 2, 4 and 5, although not specific to lawyers, provide information of interest.
The FIC also publishes the Public Compliance Communication PCC series to provide an interpretation of issues arising out of FICA.
IS THE LAW SOCIETY/BAR ASSOCIATION INVOLVED IN SUPERVISING OR ENFORCING COMPLIANCE WITH ANTI-MONEY LAUNDERING REGULATIONS?
The LSSA is listed as a supervisory body under Schedule 2 to FICA. As such the LSSA is responsible for supervising compliance with the provisions of Chapter 3 of FICA by all lawyers regulated or supervised by it.
DESCRIBE CLIENT DUE DILIGENCE REQUIREMENTS, INCLUDING WHEN IT MUST BE UNDERTAKEN BY LAWYERS.
FICA outlines the following duties lawyers must respect, namely -
The Duty to Identify Clients which requires that a lawyer cannot establish a business transaction or conclude a transaction with a client without the lawyer having taken sufficient steps in establishing and verifying the client's identity and if necessary, the identity and the authority of the client's agent or principal;
The Duty To Keep Records which requires that a lawyer must keep records of the identity of a client, the identity of anyone acting on behalf of the client, the nature of the business relationship or transaction, details and accounts of the transaction and any relevant documents for at least five years;
The Duty To Inform The Financial Intelligence Centre ("FIC") of any requested information or any suspicious activity, which includes reporting certain transactions to the FIC;
The Duty To Formulate And Implement Internal Rules within the legal firm in upholding these obligations;
The Duty to train employees; and
The Duty to appoint a responsible person to monitor compliance.
Attorneys are, however, specifically exempted from compliance with the provisions of Parts 1 (duty to identify clients) and 2 (duty to keep records) of Chapter 3 of FICA in respect of every business relationship or single transaction, except for a business relationship or single transaction in terms of which:
A client is assisted in the planning or execution of -
The buying or selling of immovable property;
The buying or selling of any business undertaking;
The opening or management of a bank, investment or securities account;
The organisation of contributions necessary for the creation, operation or management of a company or close corporation or of a similar structure outside the Republic;
The creation, operation or management of a company or close corporation or of a similar structure outside the Republic;
The creation, operation or management of a trust or of a similar structure outside the Republic, except for a trust established by virtue of a testamentary writing or court order.
A client is assisted in disposing of, transferring, receiving, retaining, maintaining control of or in any way managing any property;
A client is assisted in the management of any investment;
A client is represented in any financial or real estate transaction; or
A client deposits, over a period of twelve months, an amount of R100 000 or more with the institution in respect of attorney's fees which may be incurred in the course of litigation.
DOES YOUR COUNTRY FOLLOW A RISK-BASED APPROACH TO CLIENT DUE DILIGENCE BY LAWYERS?
Lawyers and legal firms are not required to follow a one-size-fits-all approach in identification methods and the levels of verification that are applied to all relevant clients.
The implication is therefore that the greater the risk, the higher the level of verification, and the more secure the verification measures should be, underlying the risk-based approach.
ARE THERE ENHANCED DUE DILIGENCE MEASURES FOR CERTAIN TYPES OF CLIENTS, FOR EXAMPLE, POLITICALLY EXPOSED PERSONS?
Pursuant to section 25 of POCDATARA, the President must, by Proclamation in the Gazette, and other appropriate means of publication, give notice that the Security Council of the United Nations, under Chapter VII of the Charter of the United Nations, has identified a specific entity as being an entity who commits, or attempts to commit, any terrorist and related activity or participates in or facilitates the commission of any terrorist and related activity; or an entity against whom Member States of the United Nations must take the actions specified in Resolutions of the said Security Council, in order to combat or prevent terrorist and related activities. The effect of such proclamations is to identify the entities on the list as being linked to terrorist activities for purposes of POCDATARA.
Pursuant to section 28A of FICA, an accountable institution (including attorneys) which has in its possession or under its control property owned or controlled by or on behalf of, or at the direction of any entity which has committed, or attempted to commit, or facilitated the commission of a specified offence as defined in POCDATARA, or specific entity identified under section 25, must within the prescribed period report that fact and the prescribed particulars to the FIC. Section 12 of POCDATARA also introduces an obligation to report certain offences linked to terrorist activity including terrorist financing.
ARE THERE SIMPLIFIED DUE DILIGENCE MEASURES FOR CERTAIN TYPES OF CLIENTS, FOR EXAMPLE, LISTED COMPANIES?
Every accountable institution (including attorneys) is exempted from compliance with the majority of the identification, verification and record keeping obligations in respect of a business relationship established or a single transaction concluded with a public company, the securities of which are listed on a stock exchange.
The only information which is required is the entity's registration number, its registered name as well as the address from which the transaction is to take place or, if it operates more than one office, the head office as well.
Accountable institutions are also exempted from verification if :
A client is situated in a country where, to the satisfaction of the relevant supervisory body, anti-money laundering regulation and supervision of compliance with such anti-money laundering regulation, which is equivalent to that which applies to the accountable institution is in force;
A person or institution in that country, which is subject to the anti-money laundering regulation referred to above confirms in writing to the satisfaction of the accountable institution that the person or institution has verified the particulars concerning that client which the accountable institution had obtained in accordance with section 21 of FICA; and
The person or institution undertakes to forward all documents obtained in the course of verifying such particulars to the accountable institution.
Note further that there are different identification and verification requirements depending on whether the client or prospective client is a company (foreign or local), close corporation, partnership, trust or individual (resident or foreigner).
ARE LAWYERS PERMITTED TO RELY ON THIRD PARTY DUE DILIGENCE? IF YES, PLEASE DESCRIBE.
Every accountable institution is exempted from compliance with the provisions of section 21 (duty to identify and verify) and 22(1)(a), 22(1)(b), 22(1)(c), 22(1)(d), 22(1)(e), 22(1)(h) and 22(1)(i) (duty to keep records) of FICA , in respect of a business relationship or single transaction which is established or concluded with that institution (the second accountable institution) by another accountable institution (the primary accountable institution) acting on behalf of a client of that primary accountable institution, subject to the condition that the primary accountable institution confirms in writing to the satisfaction of the second accountable institution that:
It has established and verified the identity of the client in accordance with section 21 of FICA; or
In terms of its internal rules and the procedures ordinarily applied in the course of establishing business relationships or concluding single transactions the primary accountable institution will have established and verified, in accordance with section 21 of FICA, the identity of every client on whose behalf it will be establishing business relationships or conducting concluding single transactions with the second accountable institution.
WHEN IS A LAWYER UNDER AN OBLIGATION TO REPORT SUSPICIOUS TRANSACTIONS?
Pursuant to section 29(1) of FICA, a person who carries on a business, or is in charge of, or manages a business, or is employed by a business and knows or suspected that –
The business has received or is about to receive the proceeds of unlawful activities or property which is connected to an offence relating to the financing of terrorist and related activities;
A transaction or series of transactions to which the business is a party:
Facilitated or is likely to facilitate the transfer of the proceeds of unlawful activities or property which is connected to an offence relating to the financing of terrorist and related activities;
Has no apparent business or lawful purpose;
Is conducted for the purpose of avoiding giving rise to a reporting duty under FICA;
May be relevant to the investigation of an evasion or attempted evasion of a duty to pay any tax, duty or levy imposed by legislation administered by the Commissioner for the South African Revenue Service; or
Relates to an offence relating to the financing of terrorist and related activities; or
The business has been used or is about to be used in any way for money laundering purposes or to facilitate the commission of an offence relating to the financing of terrorist and related activities,
must, within the prescribed period after the knowledge was acquired or the suspicion arose, report to the FIC the grounds for the knowledge or suspicion and the prescribed particulars concerning the transaction or series of transactions.
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 knows or suspects that a transaction or a series of transactions about which enquiries are made, may, if that transaction or those transactions had been concluded, have caused any of the consequences referred to in section 29(1) FICA mentioned above must, within the prescribed period after the knowledge was acquired or the suspicion arose, report to the FIC the grounds for the knowledge or suspicion and the prescribed particulars concerning the transaction or series of transactions.
Note that, under PRECCA, there is also a duty on any person in position of authority who knows or ought reasonably to have known or suspected that any other person has committed certain offences to report to any police official (section 34). Pursuant to section 12 of POCDATARA, there is an obligation to report certain offences linked to terrorist activity including terrorist financing.
DOES ATTORNEY/CLIENT PRIVILEGE AND/OR DUTIES OF CONFIDENTIALITY PROVIDE A DEFENCE OR PARTIAL/TOTAL EXCEPTION TO THE REQUIREMENT TO REPORT SUSPICIOUS TRANSACTIONS?
Pursuant to section 37(2) of FICA, reporting duties and obligations to provide information is subject to the common law right to legal professional privilege as between an attorney and the attorney's client in respect of communications made in confidence between-
The attorney and the attorney's client for the purposes of legal advice or litigation which is pending or contemplated or which has commenced; or
A third party and an attorney for the purposes of litigation which is pending or contemplated or has commenced.
DOES LOCAL LAW PROVIDE ANY CRIMINAL AND/OR CIVIL INDEMNITY TO A LAWYER WHO HAS REPORTED A SUSPICIOUS TRANSACTION?
Lawyers who report a suspicious transaction in good faith are protected from being identified as well as from legal liability.
ONCE A SUSPICIOUS TRANSACTION REPORT HAS BEEN FILED, IS A LAWYER ALLOWED TO PROCEED WITH THE LEGAL ADVICE/TRANSACTION, AND, IF SO, MUST CONSENT FROM AUTHORITIES BE OBTAINED FIRST?
A lawyer may continue with and carry out the transaction in respect of which the report is required to be made unless the Centre directs the lawyer not to proceed with the transaction.
IS THERE A TIPPING-OFF PROHIBITION? IF YES, PLEASE DESCRIBE.
Pursuant to sections 29(3) and (4) of FICA, no person who made or must make a report or who knows or suspects that a report has been or is to be made may disclose such information to any other person, including the person in respect of whom the report is or must be made, otherwise than:
Within the scope of the powers and duties of that person in terms of any legislation;
For the purpose of carrying out the provisions of FICA;
For the purpose of legal proceedings, including any proceedings before a judge in chambers; or
Pursuant to an order of court.
DESCRIBE ANY RESTRICTIONS ON ACCEPTING A NEW CLIENT.
Section 21 of FICA provides that an attorney cannot accept a new client unless he has taken the prescribed steps:
Establish and verify the identity of the client;
If the client is acting on behalf of another person, establish and verify:
The identity of that person; and
The client's authority to establish the business relationship or to complete the single transaction on behalf of that other person; and
If another person is acting on behalf of the client, to establish and verify:
i) The identity of that other person; and
ii) That other person's authority to act on behalf of the client.
ARE THERE ONGOING MONITORING REQUIREMENTS FOR EXISTING CLIENTS? IF YES, PLEASE DESCRIBE.
Pursuant to Regulation 19 of the Money Laundering and Terrorist Financing Control regulations issued under FICA, an accountable institution must take reasonable steps, taking into account any guidance notes concerning the verification of identities which may apply to that institution, in respect of an existing business relationship, to maintain the correctness of particulars which are susceptible to change and are provided to it.
DESCRIBE ANY OTHER WAYS IN WHICH LAWYERS ARE AFFECTED BY ANTI-MONEY LAUNDERING LEGISLATION.
No information available.
HAVE LAWYERS IN YOUR JURISDICTION BEEN IMPLICATED IN MONEY LAUNDERING, INCLUDING ANY TYPE OF COMPLAINT, ARREST OR PROSECUTION?
No information available.
HAS THE FINANCIAL ACTION TASK FORCE (FATF) CONDUCTED A MUTUAL EVALUATION OF THIS COUNTRY, AND, IF SO, WHAT WERE THE FINDINGS CONCERNING LAWYERS’ COMPLIANCE WITH THE FATF 40+9 RECOMMENDATIONS?
Yes, the FATF published a mutual evaluation report on South Africa in March 2009
According to the report, the AML laws were non compliant with the FATF recommendations in relation to procedures for politically exposed persons, third parties and introducers, and special attention requirements for higher risk countries, and are partially compliant in relation to customer due diligence, record keeping and reporting of unusual transactions.
According to the report, implementation of the reporting obligation by lawyers is negatively affected by a lack of clarity on how to interpret legal privilege in the context of meeting the reporting obligations prior to FICA.
Information provided by:
Dr Ina Meiring
Werksmans Advisory Services (Pty) Ltd.
155 – 5th Street
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