There seems to be some confusion amongst short-term brokers regarding their duties and obligations under FICA and its anti-money laundering regulations.

Schedule 1 of the Financial Intelligence Centres Act 38 of 2001 (“FICA”) specifically excludes a short-term insurance broker or intermediary from the list of “accountable institutions”. This effectively means that a short-term broker does not have to identify and verify any client or prospective client with whom it concludes a single transaction or with whom it establishes a business relationship.

This has led some of the industry players in the short-term insurance space to believe that they are dissolved from their duties and obligations under FICA. FICA and its anti-money laundering regulations, however, go much further than just the obligation to obtain identification documents and utility bills.

Duty to report suspicious and unusual transactions

Section 29 of FICA requires all business organisations, their managers and employees of such businesses to identify and report suspicious and unusual transactions to the Financial Intelligence Centre (“FIC”). The term “business” is not defined in FICA. The ordinary meaning of the term, within the context of the FIC Act, is that of a commercial activity. This means that any person associated with a commercial undertaking as an owner, manager or employee of that undertaking, can become subject to the obligation to report suspicious or unusual transactions. Failure to file such a report amounts to an offence which could lead to a sentence of 15 years imprisonment or a R10 million fine.

All persons must, as soon as possible, but within a period of 15 working days of the knowledge being acquired or suspicion of the transaction arose file a report to the Financial Intelligence Centre at www.fic.gov.za.

Once the conclusion is reached that a situation exists which should give rise to a suspicion that a transaction relates to proceeds of unlawful activities, money laundering or terror financing, the transaction must be reported irrespective of the amount involved.

A person involved in the Suspicious Transaction Reporting (“STR”) may not inform anyone, including the customer or any other person associated with a reported transaction, of the contents of a STR or even the fact that such a report has been made.

Appointment of a MLRO

The MLRO is the person appointed in terms of Section 43(b) of FICA, responsible for the oversight of the institution’s anti-money laundering activities and the key person in the implementation of the anti-money laundering strategy of the institution. The MLRO will act as the “appropriate person” to receive and process internal and external suspicious transaction reports. The MLRO will also act as a central point of contact with the law enforcement agencies. The type of person appointed as MLRO will vary according to the size of the institution and the nature of its business, but he or she should be sufficiently senior to command the necessary authority.

The reporting of suspicious and unusual transactions is regarded as an essential element and international standard of the anti-money laundering programme for every country. But perhaps more pressing, is the fact that no broker, or his or her employees, wants to be faced with a fine of R10 million or possible 15 years of imprisonment.

Article provided by: FAnews