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Picture: SUPPLIED/FIC
Picture: SUPPLIED/FIC

A board of executors, a trust company or any other person that invests, keeps in safe custody, controls or administers trust property as defined by the Trust Property Control Act, 1998 Act 57 is deemed an accountable institution, and is required to register with the Financial Intelligence Centre (FIC).

In June 2020, the National Treasury published proposed amendments to the schedules of the Financial Intelligence Centre Act, 2001 (Act 38 of 2001).

The proposed amendments* update the definition of item 2 of schedule 1:

A person who carries on a business of preparing for or carrying out transactions for a client where:
(a) a client is assisted in the planning or execution of
(i) the organisation of contributions necessary for the creation, operation or management of a company, or of an external company, or of a foreign company, as defined in the Companies Act, 2008; 
(ii) the creation, operation or management of a company, or of an external company, or of a foreign company, as defined in the Companies Act, 2008; 
(iii) the operation or management of a close corporation, as defined in the Close Corporations Act, 1984; or 
(iv) the creation, operation or management of a trust or of a similar structure outside the republic, except for a trust established by virtue of testamentary writing or court order;

or 

(b) a client is assisted in acting as or arranging for another person to act as a nominee, as defined in the Companies Act, 2008. 

When these changes are adopted, all trust company service providers that meet the new definition will be required to register as accountable institutions with the FIC.

Obligations of trust and company service providers

A lack of adequate controls for combating money laundering and terrorist financing leaves accountable institutions vulnerable. Trust company service providers are sometimes used by criminals to establish legal entities with the sole purpose of using that entity to launder illicit funds or facilitate terrorist financing. Trust company service providers need to meet their FIC Act obligations and remain vigilant to the risk of money laundering and terrorist financing. 

The FIC Act requires an accountable institution to fulfil compliance obligations which assist in identifying the proceeds of crime and combating money laundering and terrorist financing. Among these obligations are customer due diligence; record-keeping; establishing a compliance function; developing and implementing a risk management and compliance programme (RMCP); training employees on FIC Act compliance and the institution’s RMCP; and registering with and submitting various reports to the FIC. 

Targeted financial sanctions 

The Financial Action Task Force (FATF) defines the term proliferation finance (PF) risk as the possibility of a violation, non-implementation, or evasion of the targeted financial sanctions requirements, while terrorist financing (TF) encompasses the means and methods used by terrorist organisations to finance their activities. 

SA has a two-pronged approach to targeted financial sanctions based upon the country’s obligation as a member of the UN. This supports FATF recommendations on the implementation of the UN Security Council resolutions on a targeted financial sanctions regime, as required by being a FATF member country.

The application of the Security Council resolutions and FATF recommendations by SA are reflected in sections 26A, 26B, 26C and 28A of the FIC Act which deals with proliferation financing and sections 4 and 25 of the POCDATARA Act that deals with terrorist financing.

Targeted financial sanctions lists are published in terms of section 26A of the FIC Act, and can be searched on the FIC website and section 25 of POCDATARA on the SA Police Services website or UNSC website. 

No person may have any dealings with a person or an entity that has been identified on the TFS lists. 

For trust company services providers to determine if they are dealing with an identified person, they are required to scrutinise their clients' information against these TFS lists.

An accountable institution must file a terrorist property report with the FIC if they know they possess or control property of a person or entity which has committed, attempted to commit, or facilitated the commission of, a specified offence as defined in the POCDATARA Act and/or is identified in the TFS lists under section 25 of POCDATARA Act or section 26A (1) of the FIC Act.

Further information can be found on the FIC website by referring to public compliance communication 44 and guidance note 6A and guidance on targeted financial sanctions. 

*The final amendments wording may differ.

This article was paid for by the Financial Intelligence Centre.

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