TO ALL LEGAL PRACTITIONERS DESIGNATED AS ITEM 1 ACCOUNTABLE INSTITUTIONS IN TERMS OF THE FINANCIAL INTELLIGENCE CENTRE ACT: RISK AND COMPLIANCE REQUIREMENTS

Because of the nature of their business, across the globe, legal practitioners are known to be vulnerable to being abused for money laundering purposes.

It was with this in mind that the Financial Intelligence Centre (FIC) and the Law Society of South Africa (LSSA) met this week to focus on enhancing compliance of the legal practitioners as designated accountable institutions, in terms of item 1 of Schedule 1 to the Financial Intelligence Centre Act, 2001 (Act 38 of 2001).

The LSSA raised with FIC as range of critical issues facing the profession, in particular the completion of the risk and compliance return as directed by Directive 6 of the Financial Intelligence Centre (FIC).

The FIC explained during the meeting how the requirement for the legal practitioner sector to complete the risk and compliance returns, is a fundamental remediation activity on the Financial Action Task Force (FATF) grey listing action items for South Africa. It was therefore of fundamental importance that legal practitioners complete their risk and compliance return, which was due by 31 May 2023, and that they send the outstanding return without delay to the FIC.

The sector has been impacted by FIC Act changes to Schedule 1, which came into effect on 19 December 2022. With the amendments to this Schedule, there is a requirement for attorneys practising for their own account; advocates that practise with a fidelity fund certificate i.e. those advocates that deal directly with the clients from the public; and legal firms to comply with the FIC Act.

A key aspect discussed was registration of the sector with the FIC, as a basic FIC Act compliance requirement for all accountable institutions.

The FIC was pleased about the opportunity to engage with the LSSA on these and other important topics, which are central to addressing the concerns raised by the FATF, following its evaluation of South Africa’s regime for combating money laundering and terrorist financing.

The FATF’s grey listing of the country earlier this year places responsibility for regulatory compliance by identified sectors to avoid them being relegated to being of high risk.

The FIC’s executive manager for compliance and prevention, Christopher Malan, said he was pleased with the outcome of the discussions: “It is really important that the legal profession is aware of their FIC Act compliance obligations and have an understanding of how they may be abused for money laundering and/or terrorist financing purposes.

“Their vulnerability to being exploited for purposes of financial crime puts them and the country at risk.”

Executive director for LSSA, Tony Pillay, said that the LSSA looks forward to further engagement with the FIC with the view of considering the specific contextual realities of the legal profession. The LSSA will also present workshops and webinars, and provide guidelines and regular updates to practitioners, to assist them in complying with the FICA legislation.

The FIC and the LSSA agreed to engage regularly in the future to ensure that compliance measures aimed at combating financial crime receives the necessary attention. The FIC also informed the LSSA that it would be invited into a new designated non-financial and businesses and professions (DNFBP) industry association working group being convened by the FIC in terms of the FIC Act Enforcement Forum framework.

ISSUED BY THE FINANCIAL INTELLIGENCE CENTRE
FOR MORE INFORMATION PLEASE E-MAIL: media@fic.gov.za

Note to editors: As South Africa’s national centre for the gathering and analysis of financial data, the role of the Financial Intelligence Centre (FIC) is to safeguard the integrity of the country’s financial system and its institutions. In pursuit of this, the Financial Intelligence Centre Act, 2001 (Act 38 of 2001), mandates the FIC to assist in the identification of the proceeds of crime, in combating money laundering and in the financing of terrorism, and facilitate effective supervision and enforcement of the Act.
Under this legislation, financial and non-financial institutions are required to fulfil certain compliance obligations, including registering with, and filing various regulatory reports to the FIC. The information provided in these reports forms the basis upon which analysis is conducted to develop financial intelligence reports for use by a wide range of law enforcement agencies, investigative authorities, and other institutions to facilitate the administration and enforcement of the laws of the Republic. The FIC Act also sets out the enforcement and penalty regime for non-compliance with the FIC Act.
The 2021/22 financial year saw initiatives which had been implemented in prior years take further root and yield results through collaboration and partnerships. Among these was the work of the Fusion Centre, a collaboration of law enforcement agencies and the FIC, and that of the public-private partnership, the South African Anti-Money Laundering Integrated Task Force. Both initiatives bring together necessary resources and focus attention on dealing with money laundering and terrorist financing.
The financial year also saw the adoption of the Financial Action Task Force mutual evaluation report in October 2021, following their assessment of the country’s capability and capacity for combating money laundering, terrorist financing and proliferation financing. Work to address the identified deficiencies got under way in the 2021/22 financial year.

For more about the FIC visit www.fic.gov.za
ITEM 2021/22
Total institutions registered 45 555
Regulatory reports received >5.12 million
Cash threshold reports received >4.5 million
Suspicious and unusual transaction reports received 533 277
Inspection reports issued by FIC and supervisory bodies 404 FIC and 739 supervisory bodies
Value of sanctions imposed >R41 million
Financial intelligence reports disseminated 3 114
Responses to requests for financial intelligence 2 300
Proactive financial intelligence reports disseminated 782 of which 131 related to high-priority matters
Financial intelligence reports on illicit financial flows 32
Value of suspected criminal proceeds frozen R204 million
Proceeds preserved and recovered through Fusion Centre over two years since the inception of the Fusion Centre >R1.75 billion
Value of proceeds of crime recovered, in which the FIC’s financial intelligence was used >R5.1 billion
Collaboration between SAMLIT and the Fusion Centre over the last two
years led to the preservation and directives to freeze accounts to this amount R86 million