Legal community must be Fica compliant to avoid being considered high risk

Legal practitioners are prone to being abused for money-laundering purposes because of the nature of their business.

It was with this in mind that the Financial Intelligence Centre (FIC) and the Law Society of SA met this week to focus on enhancing compliance of legal practitioners as designated accountable institutions in terms of the Financial Intelligence Centre Act (Fica).

Fica has been amended to include more businesses under the scope of “accountable institutions”, meaning such businesses must comply with laws aimed at preventing illegal activities or face possible hefty penalties.

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) greylisting action items for SA.

The sector has been affected by Fica changes to schedule 1, which came into effect on December 19 2022. With the amendments to this schedule there is a requirement for attorneys practising for their own account, advocates who practice with a fidelity fund certificate, namely those advocates who deal directly with clients from the public, and legal firms to comply with Fica.

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

The FATF’s greylisting of the country earlier in 2023 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: “It is really important that the legal profession is aware of their Fica 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. 

Law Society executive director Tony Pillay said they looked forward to further engagement with the FIC “with the view of considering the specific contextual realities of the legal profession”.

He said: “The Law Society will also present workshops and webinars, and provide guidelines and regular updates to practitioners, to assist them in complying with the Fica legislation.”

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