financial intelligence centre REPUBLIC OF SOUTH AFRICA

Transcription

1 Supervision and Enforcement in terms of the Financial Intelligence Centre Act of 2001 Live Broadcast 10 October 2012

2 Principles of the FIC Act Supervision & Enforcement Model All Accountable an Reporting Institutions will be supervised by a Supervisory Body (SB) or the Financial Intelligence Centre (the FIC) The FIC Act supervision and enforcement model is built on consensus between the SBs and the FIC There needs to be a standardised approach relating to supervision and enforcement of the FIC Act The FIC must facilitate effective supervision and enforcement by supervisory bodies - s3(2)(c) -2-

3 FIC Act Supervision & Enforcement Model SBs take responsibility to supervise and enforce all the compliance obligation imposed on accountable institutions regulated by the supervisory body The FIC takes responsibility to supervise and enforce non-compliance with the FIC Act on AIs and RIs not regulated or supervised by a supervisory body The FIC takes responsibility to supervise and enforce non-compliance with the FIC Act on accountable institutions regulated or supervised by a supervisory body where the supervisory body fails to fulfil its responsibilities default supervisor -3-

4 FIC Act Supervision & Enforcement Model It is the duty of the FIC to: Monitor and give guidance to AIs, SBs and other persons regarding the performance and compliance by them of their duties and obligations in terms of the FIC Act or any directive made in terms of the FIC Act - s4(c) Annually review the implementation of the FIC Act and submit a report to the Minister - s4(e) -4-

5 FIC Act Supervision & Enforcement Model Supervisory Bodies may: Issue or amend any licence, registration, approval or authorisation that the SB may issue or grant in accordance with any act to include compliance with the FIC Act s45(1b)(e) In making a determination in accordance with any act applicable as to whether a person is fit and proper to hold office in an accountable institution, take into account any involvement, directly or indirectly, by that person in any non-compliance with the FIC Act or any order, determination or directive made in terms of the FIC Act s45(1b)(f) -5-

6 FIC Act Supervision & Enforcement Model Every SB is responsible for supervising and enforcing compliance with the FIC Act by all AIs regulated or supervised by it s45(1) The obligation forms part of the legislative mandate of any SB and constitutes a core function of that SB s45(1a)(a) The only exceptions, where the FIC takes prime responsibility would be: Registration with the FIC Reporting to the FIC National compliance returns filed with the FIC, in terms of a directive issued by the FIC -6-

7 FIC Act Supervision & Enforcement Model SBs are listed in schedule 2 to the FIC Act and include the FSB, BSD, Finsurv, NPSD, EAAB, IRBA, NGB, PLAs and Provincial Law Societies The FIC is responsible for supervising and enforcing compliance with the FIC Act by all AIs not regulated or supervised by an SB which include: Trust companies Entities who lend money against the security of securities The Postbank Ithala Development Corporation MVDs (reporting institution) Kruger Rand dealers (reporting institution) -7-

8 FIC Act Supervision & Enforcement Model The FSB is responsible for supervising and enforcing compliance with the FIC Act by institutions listed in items 4, 5, 8 and 12 of Schedule 1: An authorised user of an exchange as defined in the Securities Services Act, No 36 of 2004 A manager registered in terms of the Collective Investment Schemes Control Act, No 45 of 2002 (the CISCA), but excludes managers who only conduct business in part VI of the CISCA A person who carries on a long term insurance business as defined in the Long-Term Insurance Act, No 52 of 1998 A person who carries on the business of a financial services provider requiring authorization in terms of the Financial Advisory and Intermediary Services Act, No 37 of 2002, to provide advice and intermediary services in respect of the investment of any financial product (but excluding a short term insurance contract or policy referred to in the Short-term Insurance Act, No 53 of 1998 and a health service benefit provided by a medical scheme as defined in section 1(1) of the Medical Schemes Act, No 131 of 1998). -8-

9 Directives The FIC may by notice in the Gazette, issue directives to all institutions to which FIC Act applies regarding application of the FIC Act - s43a(1) The FIC or supervisory body may, in writing, issue a directive to a category of accountable or reporting institution or other category of person to whom the FIC Act applies regarding application of the FIC Act - s43a(2) SB may issue directive only after consulting the FIC s43a(6)(b) -9-

10 Risk Based approach to Supervision SB s follow a risk based approach to supervision: Assist in choosing the entity to be inspected Assist in deciding the frequency and intensity of the inspection This will allow resources to be allocated in the most efficient way Resources should be directed in accordance with priorities - greatest risks receive the highest attention Proportionate administrative actions will be taken Adhere to international standards -10-

11 Inspections in terms of the FIC Act The purpose of inspections in terms of the FIC Act is to determine the level of compliance of the accountable institution The FIC and FSB cannot use the inspections powers to investigate any criminal conduct Should the FIC or FSB detect any criminal conduct during an inspection, it may refer the matter to law enforcement to investigate The allegations of criminal conduct may be an indication that an accountable institution has not complied with the FIC Act and may lead to an inspection -11-

12 On-site reviews v Inspections What is the difference between on-site reviews and inspections: FSB legislation draws the distinction between on-site reviews and inspections In the FSB and in practice, the compliance departments are making use of on-site reviews, whilst the Inspectorate are making use of the inspection powers The inspection powers are more intrusive than the on-site review powers -12-

13 On-site reviews v Inspections The outcome of an on-site review is usually a compliance request to rectify any deficiencies, whilst the outcome of inspections usually lead to administrative sanctions On-site reviews are pro active and preventative in nature in that it is aimed at guiding and advising institutions in order to be compliant with legislation Inspections are usually reactive in nature and occurs when information is received that an institution is willfully non-compliant with legislation -13-

14 On-site reviews v Inspections The FIC Act does not draw a distinction between on-site reviews and inspections An inspection in terms of the FIC Act can therefore be pro active or reactive, routine or non-routine The inspection team will decide on the intensity of the inspection A FIC Act inspection may be conducted by any department of the FSB The outcome of a FIC Act inspection may be a compliance request to rectify any non compliance or an administrative sanction depending on the facts of the case -14-

15 Inspections in terms of the FIC Act Provisions are similar to the provisions in the Inspections of Financial Institutions Act Head of SB must appoint inspectors prior to inspection Head of SB may extend the appointment and functions under the Inspections Act to include the undertaking of inspections under the FIC Act Inspection done at reasonable time and notice where appropriate Secrecy -15-

16 Types of Inspections Routine Non-routine Proactive By notification Preventative in nature Less intrusive Reactive Discretion React on information received regarding possible non-compliance More intrusive Remedial/ Sanction Costs if non-compliance Remedial/ Sanction Costs if non-compliance -16-

17 Scope of inspections Duty Section Applicable Regulations Applicable guidance notes or PCCs Applicable exemptions Administrative sanction Criminal sanction Identify and verify client 21 3 to 19 & 21 GN 1, 2, 3 PCC03, 03A, 08, 09, 10, 11, 14 2 to 16 R50 million for legal person R10 million for natural person R100 million or 15 years imprisonment Duty to keep records 22; 23 & & 26 PCC02 3 TO 17 R50 million for legal person R10 million for natural person R100 million or 15 years imprisonment Reporting duties 28; 28A & 29 22; 22A; 22B; 22C; 23; 24; 27A; 27B & 27C GN 4 & 5 PCC04 N/A R50 million for legal person R10 million for natural person R100 million or 15 years imprisonment Formulating and implementing of internal rules 42 25; 26 & 27 N/A N/A R50 million for legal person R10 million for natural person R10 million or 5 years imprisonment Training of employees regarding the FIC Act and internal rules 43(a) N/A N/A N/A R50 million for legal person R10 million for natural person R10 million or 5 years imprisonment Appointment of the compliance officer 43(b) N/A PCC 12 N/A R50 million for legal person R10 million for natural person R10 million or 5 years imprisonment Registration with the Centre 43B 27A GN05 PCC05, 06, 07 N/A R50 million for legal person R10 million for natural person R10 million or 5 years imprisonment -17-

18 Inspections in terms of the FIC Act SB leads inspection accompanied by the FIC SB is the lead on general compliance and FIC on registration & reporting SB leads inspection not accompanied by the FIC FIC to advise SB on registration and reporting FIC leads inspection (registration & reporting only) FIC is the lead on registration & reporting & SB assist One inspection report issued by SB. SB to issue the sanction One inspection report issued by SB. SB to issue sanction One inspection report issued by the FIC. FIC to issue sanction -18-

19 Powers of inspectors Question anyone Order any person to produce a document Open any strongroom or container Access any computer system or equipment Examine, make copies or seize any document -19-

20 Inspections Inspection is based on a questionnaire The questionnaire covers all compliance duties of an accountable institution The s43 compliance officer and/or CEO/Director/Head of the institution are required to attend the inspection Certain documentation will be requested prior to the inspection i.e Appointment letter of s43 compliance officer Internal rules Training manual & documents -20-

21 Inspections Staff members will also be questioned Sampling of client files will be done to determine: CIV obligations Record keeping obligations Reporting obligations The amount of files sampled will be determined by the type and scope of the inspection The process, procedure or system for detecting and reporting CTRs and STRs will also be tested -21-

22 Collecting evidence Seize original documentation against issue of a receipt Documents may also be scanned Maintain evidence register -22-

23 Inspection offences The failure to appear for questioning The failure to produce a document Intentionally gives false information The failure to comply with a reasonable request Intentionally hinders an inspector in the performance of his functions Administrative penalty: Natural person: R10 million Legal person: R50 million Criminal penalty: 5 years imprisonment R10 million -23-

24 Post inspection An inspection report is written by the inspectors Inspected institution to make comments on the inspection report Final inspection results issued -24-

25 Costs The FIC or a supervisory body may recover all expenses necessarily incurred in conducting an inspection from an AI, RI or person inspected s45b (3) Inspection manual: cost will only be recovered when material noncompliance is found Where FIC accompanies a SB, FIC will pay their own costs. Those costs cannot be recovered from the AI -25-

26 Administrative Sanctions The FIC or SB may impose an administrative sanction on any AI, RI or other person to whom the act applies when satisfied on available facts and information that the institution or person: Has failed to comply with the FIC Act Has failed to comply with a condition of a licence, registration, approval or authorisation issued i.t.o s45 (1B)(e) Has failed to comply with a directive Has failed to comply with non-financial administrative sanction -26-

27 Administrative Sanctions The decision to sanction or not will depend on the following factors: the willingness of the AI to comply the nature, duration, seriousness and extent of the non-compliance whether the AI has previously failed to comply with the FIC Act any remedial steps taken by the institution or person to prevent a recurrence of the non-compliance any other mitigating or aggravating factors -27-

28 Administrative Sanctions The FIC or SB may impose any appropriate administrative sanction s45c (6) The FIC Act provides various administrative sanctions which includes: a caution not to repeat the conduct which led to the non-compliance a reprimand a directive to take remedial action or to make specific arrangements the restriction or suspension of certain specified business activities a financial penalty -28-

29 Administrative Sanctions SBs to consult the FIC before imposing an administrative sanction SB to impose sanction after representations from the inspected institution s45c (5) & (6) The Director or SB must, subject to certain conditions, make public the decision and nature of the sanction imposed s45c (11) -29-

30 Penalties imposed Any financial penalty imposed must be paid into the Criminal Assets Recovery Account (CARA) established by s63 of POCA - s45c (7) CARA is controlled by a Ministerial committee - s65 of POCA The committee is to advise Cabinet in connection with the rendering of financial assistance to law enforcement agencies and any other institutions, organisations or funds established with the object to render assistance to victims of crime - s68, 69 & 69A of POCA -30-

31 Appeals The appellant must lodge an appeal against a decision of the FIC or SB made in terms of s45c (6) with the chairperson of the appeal board regulation 27C Where the SB conducted inspections i.t.o. other legislation as well, 2 reports will be drafted If the appeal is against FIC Act sanction and sanction of another legislation, the appeals will split -31-

32 Appeals The appellant must, with the appeal, pay a fee of R to the FIC regulation 27C (d) If the Appeal Board sets aside the decision of the FIC or SB, the R must be refunded to the appellant s45d (10)(a) If the Appeal Board varies a decision of the FIC or SB, it may direct that the whole or part of the R be refunded to the appellant s45d (10)(b) Any party to an appeal is entitled to be represented at an appeal by a legal representative s45d (6) -32-

33 Appeals An appeal fee of R (ten thousand rand) is payable to the FIC and proof of such payment must accompany the notice of appeal. The payment must accompany the name of the appellant as reference together with Reg 27C(d) fee when making the payment. The bank details of the FIC can be found on the notice issued by FIC on its website The appellant must complete the notice of appeal form within 30 days from the date when notice of the decision by the SB or the FIC was received in writing by the appellant. The notice of appeal, proof of payment of the appeal fee and any relevant documents must be hand delivered to the Secretary -33-

34 Appeals The office hours of the Secretary are 08:00 to 16:00 on business days and documents will only be received between these hours. The notice of appeal will only be accepted by the Secretary of the Appeal Board if all procedural and legal requirements have been adhered to. A set of the notice of appeal and other relevant documents must also be delivered to the SB if the SB imposed the administrative sanction. The Secretary of the FIC Act Appeal Board will notify all relevant parties of the date of the appeal including all procedural requirements, after consultation with the Appeal Board members and relevant parties. -34-

35 Questions & Answers -35-