COMMERCIAL INSTITUTIONS MUST APPLY DUE DILIGENCE TO BUSINESS CLIENTS Date 7 October 2013 In recent years authorities around the globe have noted the negative economic impact of the underground economy, characterised by the flow of illicit funds derived from such activities as the drug trade, fraud, corruption, the financing of terrorism, tax evasion, the avoidance of customs duties, and other illicit activities. Limiting the growth and sustainability of this alternative world is within the control of many parties, including businesses, and it is a goal that would benefit us all. One of the challenges law enforcement authorities face is the identification of the actual owners of businesses housed in various legal entities such as companies and close corporations (CCs). Often, these are structured in complex ways, specifically so that the actual individual involved is hidden. According to Christopher Malan, Executive Manager: Compliance and Prevention at the Financial Intelligence Centre (FIC): “This type of structuring may be put in place to hide and transfer proceeds of crime beyond the view of law enforcement agencies, and it can also involve moving illegal funds from one country to another.” Malan points out that economic criminals use a variety of techniques to shift funds around so that they can enjoy their illicit proceeds without being identified and brought to book for their criminal or corrupt activities. “To fight this, we must all work together,” he says. “From the perspective of a business, this means that due diligence when taking on a client is crucial. Commercial institutions must understand the importance of drilling down as much as possible into the client’s company or CC registration documents since these may well be the tools that reveal the people who are the real beneficiaries of the business.” Those sectors of the economy identified as accountable institutions in terms of the FIC Act (banks, financial service providers, stockbrokers, estate agents, and others), are urged to make every effort to understand the due diligence requirements in respect of their clients that are companies or CCs. “You should not conclude a single transaction or a business relationship with such a client unless you have obtained and verified the correct documents. For a company, the documents required are the Registration Certificate and the Notice of Incorporation; and for CCs, the most recent version of the Founding Statement and of the Certificate of Incorporation, bearing the stamp of the Registrar of Close Corporations and signed by an authorised representative of the CC,” Malan explains. Institutions can also verify these clients through a service offered by the Companies and Intellectual Property Commission (CIPC). Applying the correct procedures means that a business will help in the fight against crime, while also ensuring that it complies with the relevant regulatory legislation. --- ends --- Note to editors: The Financial Intelligence Centre (FIC) was established in 2003, through the promulgation of the Financial Intelligence Centre Act 38 of 2001 (FIC Act), with the purpose of identifying the proceeds of unlawful activities and combating money laundering and financing of terrorism. The organisation collects and analyses data sourced from reports submitted by accountable and reporting institutions. Where necessary, the FIC provides this analysis to the law enforcement authorities and the South African Revenue Service for further follow up. The FIC works closely with counterparts on the African continent as well as with international organisations. The FIC enhances levels of business compliance to the FIC Act, thereby reducing the possibility of financial and accountable institutions being exploited by criminal networks, which is core to enhancing the integrity of the country’s financial system. Amendments to the FIC Act were announced on 1 December 2010, which gave the supervisory bodies and the FIC powers of inspection and enforcement of the FIC Act and Regulations. Some statistics from the 2012/13 Annual Report of the Financial Intelligence Centre: • 21 866 accountable and reporting institutions now registered with the FIC • R1.171 billion recovered in cash from the proceeds of crime • More than 6 million cash threshold reports were received during the reporting period • 147 744 suspicious transaction reports were filed with the FIC during the reporting period • 292 inspection reports produced • The FIC experienced a 71% increase in requests for support in investigations from other organisations • FIC supported 269 Asset Forfeiture Unit investigations • As part of the Anti-Corruption Task Team, provided support in 89 priority investigations. Issued by the Financial Intelligence Centre: fic.gov.za For more information please contact: Panna Kassan on: +27 12 641 6000, +27 79 751 2172 or via e-mail on: [email protected].
Posted on: Mon, 07 Oct 2013 10:55:08 +0000
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