FINANCIAL INTELLIGENCE CENTRE BILL 2001

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FINANCIAL INTELLIGENCE CENTRE BILL 2001

• INTRODUCTION
• The Financial Intelligence Centre Bill (FIC Bill)
  is essentially the product of the Task Team on
  Money Laundering appointed by the Minster of
  Finance.
• Task Team mandated to
• review the draft Bill prepared by the South
  African Law Commission in August 1996
• consult with institutions which need to implement
  the legislation

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FINANCIAL INTELLIGENCE CENTRE BILL 2001

• INTRODUCTION
• ensure legislation is appropriate to SA
  circumstances
• make recommendations on institutional framework
  for effective implementation.
• The Bill was further refined by discussions
  between Deputy Ministers Finance and Justice, and
  
• extensive discussions with key government
  departments and agencies as directed by Cabinet,
  before approval in 2000.

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FINANCIAL INTELLIGENCE CENTRE BILL 2001

• WHAT IS MONEY LAUNDERING
• Process that obscures the illicit nature/origin
  of the proceeds of crime.
• The term money laundering coined by American
  law enforcement officials.
• Popularised during the the US Watergate inquiry
  in the mid-1970s.

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FINANCIAL INTELLIGENCE CENTRE BILL 2001

• THE MONEY LAUNDERING PROCESS
• Placement stage the proceeds of crime enter the
  financial system.
• Layering stage the separation of the illicit
  proceedings from their original criminal source.
• Integration stage split amounts are amassed and
  placed under the control of the criminal as
  apparently legitimate business funds.

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FINANCIAL INTELLIGENCE CENTRE BILL 2001

• THE COSTS OF MONEY LAUNDERING
• IMF estimates aggregate size of money laundering
  in the world between two and five percent of the
  worlds gross domestic product.
• Using 1996 statistics, value of money laundering
  ranged between US Dollar (USD) 590 billion and
  USD 1.5 trillion.
• Lower figure equal to nominal total output of an
  economy the size of Spain.

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FINANCIAL INTELLIGENCE CENTRE BILL 2001

• MONEY LAUNDERING LEGISLATION IN SOUTH AFRICA
• SA taken a very tough stand against money
  laundering.
• In 1992, the Drugs and Drug Trafficking Act, Act
  No 140, was promulgated and
• criminalised the laundering of proceeds of
  specific drug-related offences
• required the reporting of suspicious transactions
  involving the proceeds of drug-related offences.

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FINANCIAL INTELLIGENCE CENTRE BILL 2001

• MONEY LAUNDERING LEGISLATION IN SOUTH AFRICA
• 1996 The Proceeds of Crime Act, Act No 76,
  criminalised generally the laundering of
  proceeds of any type of offence.
• Created a general reporting obligation for
  businesses acquiring suspicious property
• Allowed the freezing and confiscation of the
  proceeds of crime.
• 1998 The Prevention of Organised Crime Act, Act
  No 121 (POCA), repealed the Proceeds of Crime Act
  and the money laundering provisions of Drugs and
  Drugs Trafficking Act.

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FINANCIAL INTELLIGENCE CENTRE BILL 2001

• MONEY LAUNDERING LEGISLATION IN SOUTH AFRICA
• POCA specifically criminalised money laundering
• POCA provides for general reporting obligation
  for businesses acquiring suspicious property
• NDPP may obtain information from any state body
  for investigations under POCA
• POCA provides for co-operation between
  investigators and Commissioner of SARS.

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FINANCIAL INTELLIGENCE CENTRE BILL 2001

• MONEY LAUNDERING LEGISLATION IN SOUTH AFRICA
• 2001 Financial Intelligence Centre Bill proposes
  to complement POCA, by
• introducing mechanisms measures to prevent
  combat money-laundering activities
• establishing an anti-money laundering regulatory
  regime to encourage voluntary compliance and
  self-regulation by institutions
• establishing a Financial Intelligence Centre
  (the Centre)
• establishing Money Laundering Advisory Council to
  advise Minister.

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FINANCIAL INTELLIGENCE CENTRE BILL 2001

• NATURE OF THE FINANCIAL INTELLIGENCE CENTRE
• Not an investigative body
• but repository of financial intelligence (data)
  regarding financial transactions.
• Co-ordination Centre of decentralised but
  integrated anti-money laundering regime
• To co-ordinate policy and efforts to counter
  money-laundering activities.

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FINANCIAL INTELLIGENCE CENTRE BILL 2001

• LEGAL STRUCTURE, LOCATION AND ACCOUNTABILITY
  CENTRE
• Juristic person
• Located outside the public service but within the
  public administration in terms of section 195 of
  Constitution.
• Accountable to Minister of Finance.
• Funded mainly from national budget.

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FINANCIAL INTELLIGENCE CENTRE BILL 2001

• FUNCTIONS OF THE CENTRE
• To collect, process, analyse and interpret
  information
• Inform, advise and cooperate with investigating
  authorities and the intelligence services
• Supervise and regulate compliance by accountable
  institutions
• Give guidance to accountable institutions on
  combating money-laundering
• Promote the appointment of persons to specialise
  in measures to detect and counter
  money-laundering activities.

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FINANCIAL INTELLIGENCE CENTRE BILL 2001

• HEAD OF THE CENTRE DIRECTOR
• Appointed by Minister after consultation with
  Money Laundering Advisory Council
• For period of five years subject to performance
  contract and the policy and security directions
  of Minister
• Director is chief executive officer and
  accounting authority of Centre
• Responsible for performance by Centre of its
  functions and empowered to take all decisions for
  the Centre
• Director may delegate powers and duties.

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FINANCIAL INTELLIGENCE CENTRE BILL 2001

• STAFFING OF THE CENTRE
• Director will determine and appoint staff
  establishment within policy framework determined
  by Minister
• May appoint seconded personnel to staff
• includes employees of state organs by agreement
  with Centre
• All staff, included seconded persons, to perform
  duties under control and directions of the
  Director

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FINANCIAL INTELLIGENCE CENTRE BILL 2001

• ACCESSING THE INFORMATION OF CENTRE
• Information held by Centre is confidential
• confidential information is protected and
  disclosure permitted in limited circumstances
• Access to information to limited classes of
  persons upon request in writing
• must specify the desired information and purpose
  for which required
• Investigating authority inside SA and
  intelligence services have access

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FINANCIAL INTELLIGENCE CENTRE BILL 2001

• SUPERVISORY BODIES
• Bill applies to supervisory bodies as listed in
  Schedule 2
• Minister may amend list of supervisory bodies
  after consulting the Council and Centre
• Supervisory bodies obliged to report accountable
  institutions to the Centre
• Supervisory bodies obliged to retain records
  relating to the report
• Officials or employees guilty of offence if they
  fail to report suspicion or to comply with
  request of the Centre.

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FINANCIAL INTELLIGENCE CENTRE BILL 2001

• MONEY LAUNDERING ADVISORY COUNCIL (COUNCIL)
• Bill establishes Money Laundering Advisory
  Council to advise Minister.
• Advice on policies and measures to combat money
  laundering.
• Forum for the Centre, accountable institutions
  and supervisory bodies.
• Expression of partnership between government and
  private sector.
• Composed of representatives of all role players.
• Treasury to provide administrative support.

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FINANCIAL INTELLIGENCE CENTRE BILL 2001

• ACCOUNTABLE INSTITUTIONS
• Accountable institutions institutions vulnerable
  to money-laundering.
• Bill applies to all accountable institutions as
  listed in Schedule 1.
• Minister empowered to add and remove institutions
  or to exempt accountable institutions or certain
  kinds of transactions.
• Required to implement internal administrative
  systems to keep detailed records of their
  customers and to report suspicious cash
  transactions.
• Must train their employees to recognize and deal
  with suspicious transactions.

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FINANCIAL INTELLIGENCE CENTRE BILL 2001

• MONEY LAUNDERING CONTROL MEASURES
• Accountable institutions are required to
• Know and identify their clients
• Keep records relating to business relationships
  and transactions.
• Report cash transactions above prescribed limit
  to be set
• Report suspicious transactions
• Report electronic transfers and cash conveyance
  to and from Republic.

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FINANCIAL INTELLIGENCE CENTRE BILL 2001

• ENFORCEMENT
• Relies primarily on compliance and
  self-regulation by accountable institutions
• FIC empowered to conduct administrative
  proceedings by inquiry
• FIC may make findings and order forfeiture of
  deposit placed with Center
• Monies forfeited are paid into the National
  Revenue Fund.
• FIC may impose administrative and penal sanctions
  in appropriate circumstances

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FINANCIAL INTELLIGENCE CENTRE BILL 2001

• REGULATIONS AND INDEMNITY
• Minister authorised to make regulations.
• May differentiate between different accountable
  institutions and different kinds of transactions.
• Minister, the Centre and employees and other
  representatives of the Centre are indemnified
  from liability
• provided acts in good faith in furthering the
  objects of the Act.

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FINANCIAL INTELLIGENCE CENTRE BILL 2001

• RELATIONSHIP WITH POCA
• Bill inserts a new offence in POCA of smurfing
  or structuring transactions to avoid anti-money
  laundering reporting requirements.
• Bill exempts accountable institutions from the
  provisions of section 7 of POCA in respect of
  matters which must be reported in terms of this
  Act
• Ministry envisages application of initial dual
  reporting mechanism based on 80/20 principle
  focussing on accountable institutions
• Over time as FIC evolves, remaining suspicious
  reporting will move from POCA to FIC.

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FINANCIAL INTELLIGENCE CENTRE BILL 2001

• SCHEDULES
• Schedule 1 lists the accountable institutions
  and
• Schedule 2 lists the supervisory bodies to which
  the Act will apply.
• LEGISLATIVE PROCEDURE
• Bill deals with administration of justice,
  therefore procedure set out in section 75 of
  Constitution should apply.