fic strategic overview presentation to the standing committee on finance

financial intelligence centre REPUBLIC OF SOUTH AFRICA

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financial intelligence centreREPUBLIC OF SOUTH AFRICA

Contents

1. FIC’s legislative mandate and focus areas

2. Operating model

3. FIC Act architecture

4. FIC Programmes: a) compliance and prevention programme

b) monitoring and analysis programme

c) legal and policy programme

d) corporate services and funding

5. Risks

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Financial Intelligence Centre:Vision and Mission

VISION

•The FIC strives for a safer future for all South Africans in which the financial system has integrity and transparency to support economic growth and social development.

MISSION

•The FIC promotes increasing levels of compliance with the FIC Act in an efficient and cost-effective manner, enabling it to provide high-quality, timeous financial intelligence for use in the fight against crime and the protection of national security.

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FIC’s legislative mandate

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Act / Legislation Mandate

The FIC is established in terms of the Financial Intelligence Centre Act, No. 38 of 2001 (the FIC Act), as amended (2008).

The FIC Act is geared to protect the integrity of South Africa’s financial system

• Identify the proceeds of unlawful activities• Combat money laundering activities • Combat financing of terrorist and related activities• Co-operate law enforcement agencies• Co-operate with intelligence agencies• Cooperate with international financial intelligence units • Supervise and enforce compliance with the FIC Act and facilitate

effective supervision and enforcement by supervisory bodies.

FIC Act works in conjunction with syndicated crime and terror-related legislation viz:

Prevention of Organised Crime Act, Act No. 121 of 1998 (POCA); Protection of Constitutional Democracy Against Terrorist and Related Activities Act, Act No. 33 of 2004 (POCDATARA);

South African Police Service Act (DPCI); National Strategic Intelligence Act


• The FIC’s mandate, in summary, is twofold:– To produce information that makes the criminal justice system more effective

and enhances the protection of the people of South Africa– To ensure effective compliance with the FIC Act so that the information available

to law enforcement and security agencies is of high quality

• The FIC contributes to making the South African financial system a hostile environment to illicit activity such as the hiding of proceeds of crime or funding terrorism i.e. to maintaining the integrity of the system.

• The FIC promotes increasing levels of compliance with the FIC Act enabling it to provide high-quality, timeous financial intelligence for use in the fight against crime and the protection of national security.

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FIC’s legislative mandate


FIC focus areas and strategic outcomes

• Overall, the FIC contributes to the achievement of specific national priorities and outcomes as articulated through the NDP and the MTSF– Government Outcome 3: all people in South Africa are and feel safe;

– Government Outcome 11: create a better South Africa, a better Africa and a better world;

– By so doing, FIC contributes indirectly to Outcome 4: encouraging employment through inclusive growth.

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FIC focus areas and strategic outcomes

• The FIC has defined four Strategic Outcomes as primary focus areas in the way it executes its mandate

• These align the entity’s operations to external and internal factors emanating from the legislative mandate, the NDP and the MTSF:

FIC Strategic Outcome 1:

• Improving the collection of information and the enforcement of compliance with the FIC Act


• Better utilisation of financial intelligence


• Promoting national interest in maintaining the integrity of SA’s financial system


• Ensuring a safe, secure, compliant and efficient operating environment

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2. FIC’s operating model

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Support delivery partners to

achieve Government Outcome 3:All people in

South Africa are and feel safe

Operational focus

•National crime priorities•National security priorities

National Development Plan To combat crime and corruption through: Prevention; Deterrence; SCM

Compliance and Prevention alignment with delivery partners

2. Collection of data FIC Compliance and Prevention programme; Supervision and enforcement of the FIC Act; Expansion of data sources based on guidance and application of the FIC Act

1. Planning Coordinated by Office of the Director – FICThrough document analysis, engagement with stakeholders

FIC Planning alignment to support delivery partners

National Crime Priorities

Dissemination of Finint alignment to support delivery partners

4. Dissemination of Financial intelligence FIC Monitoring and Analysis programmeSafely and securely enable exchange of information

3. Analysis FIC Monitoring and Analysis programme; for the production of financial intelligence, analysis based on financial and other data

Analysis and Finint alignment to support delivery partners

Corporate Services support to align FIC to meet delivery partners requirements

6. Operational Support FIC Corporate Services programme

5. Re-appreciation processFIC Legal and Policy programme; To produce policy and law by assessing multiple domestic and international factors

Legal and Policy alignment to support delivery partners

National Security Priorities

Contributes to protecting the financial system, in support of Government Outcome 4: Decent

employment through inclusive economic growth

Support to Government Outcome 11:

Creating a better South Africa and contribution

to a better and safer Africa in a better world

FIC primary focus: contribution and support to Government Outcomes 3, 4 and 11


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FIC’s operating model: Integration- crime combating and security


3. FIC Act:Architecture

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OtherFIUs

S

SAPS

MoF

DPCI

SSA

SARS

Data receiptProcessing

AnalysisReferral

FIC

Bank 3

Bank 2

Bank 1

CTRs

STRs

TPRs

EFTs


Architecture: Compliance requirements

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• Currently various categories of business – eg. banks, insurance industry, brokers, casinos, lawyers, estate agents

• Required to report to the Centre (Suspicious Transactions Reports; (STRs); terror financing (TPRs); cross border movement of funds reports (EFTs); large cash transactions - receipts and withdrawals (CTRs).

• Required to: Keep records for 5 years; Identify and verify clients; appoint compliance officer; provide training for staff.

• Required to register with FIC


Architecture: Supervisory bodies

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• Listed in Schedule 2 of the Act– These are: the Financial Services Board (FSB); SA Reserve Bank (BSD and

FinSurv); Estate Agency Affairs Board (EAAB), Independent Regulatory Board for Auditors (IRBA); National Gambling Board; Provincial (Gambling) Licensing Boards; the four Provincial Law Societies.

• Obliged to monitor the level of compliance by accountable institutions

• FIC supervisors where there is no supervisor (motor vehicle dealers)

• Supervisors required to monitor and enforce compliance standards


4 a) Compliance and Prevention programme: Objectives

The FIC compliance programme is responsible for compliance and supervisory relationship management.

FIC is responsible for inspection of institutions without a supervisory body (vehicle dealers, krugerrands dealers)

Uses the following methods:• Guides and advises supervisory bodies on their FIC Act supervision and

enforcement obligations• Issues guidance products interpreting FIC Act obligations• Raises levels of registration• Raises level of reporting • Maintains the FIC registration database• Conducts inspections to test and encourage compliance • Enforcement remedial actions for non-compliance

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Compliance programme:Achievements and focus areas

• The FIC has signed MOUs with 19 supervisory bodies detailing the approach in supervising compliance with FIC Act obligations

• FIC conducted compliance awareness road shows in major centres around the country over the last two years

• The number of accountable and reporting institutions registered with the FIC increased by 20% over the previous financial year

• Enforcement Forum

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Compliance programme: Achievements

• Public queries answered PQP and contact centre : 15 871

• FIC own inspections conducted : 159

• Institutions that registered with the FIC : 4 453

• Compliance awareness sessions : 45

• Media articles published : 16

• Guidance products issued : 11

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4 b) Architecture: Law enforcement authorities

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Investigate and prosecute cases involving proceeds of crime

• Receive referrals from the FIC

• Makes requests to the FIC for additional information

• Appoint Authorised Officers- To protect integrity of information

• Provide access to government databases to verify info- Ability to search criminal databases

•Provide feedback on progress made in investigations and prosecutions

• Collect and report statistics


FIC and law enforement: Key Strategic Stakeholders

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Monitoring and Analysis programme:Production of financial intelligence products, & support for investigative work

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Category 2013/14 Total5 years

Suspicious transaction reports received 355 369 623 020

Cases referred by the FIC for investigation 883 3555

Requests for financial intelligence (domestic) 1 493 4 634

Requests by international FIUs for financial intelligence

168 666

Freezing of suspected proceeds of crime R76.9 mil R563.6 mil

Affidavits in support of POCA applications 31 47

Value of assets attached under POCA due to FIC support

R486.5 mil R1,1bil

State funds stolen and recovered 0 R204.8 mil


4 c) Legal and policy programme: Objectives

•Administers the FIC Act

•Provides advice on strategic policy and legislative nature on AML/ CFT, eg legislative framework

•Leads RSA participation in Financial Action Task Force (FATF) the international inter-governmental bodies which sets international standards on money laundering and terror financing and to Eastern and Southern Africa anti-Money Laundering Group (ESAAMLG)

•Supports RSA role in AML/ CFT in other bodies, such as UN, G20 and OECD

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Legal and policy programme – Integrity of SA financial system

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•Aim to ensure SA’s legal framework against money laundering and terror financing continues to meet international standards and best practice•Developing draft legislation in partnership with National Treasury to amend FIC Act:

– Introduce more transparency in financial system• Requirement to identify beneficial owners (natural persons behind corporate veil) of

companies, trusts, partnerships etc.• Requirement to pay more attention to business relationships involving politically

exposed persons

– Introduce more flexibility for financial institutions• Allow institutions to adjust due diligence measures based on their assessment of

risk that products or services may be abused

– Improve the FIC’s analysis capacity to analyse information• Enhance its access to information and broadening range of institutions within the

scope of the FIC Act


Legal and policy programme – FATF

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• FATF sets international standards for systems to combat money laundering, and terror financing (CFT) and financing of the proliferation of weapons of mass destruction (WMD) (as set out in 40 Recommendations)

• More than 190 countries around the world subscribe to these standards

• Compliance with these standards is measured through peer review within FATF and seven regional bodies and assessments by IMF and World Bank

• Assessments by IMF and World Bank are used as one of the indicators of a country’s financial sector stability

• SA has been a member since 2003


Legal and policy programme – ESAAMLG

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• ESAAMLG is a regional body for Southern and Eastern Africa styled after the FATF

• ESAAMLG co-ordinates policy formulation relating to combating of money laundering and terror financing and promotes implementation of FATF’s international standards at regional level

• ESAAMLG conducts its own peer review process to ensure commitment within the region to combating money laundering and terror financing

• SA has been a member since 2002


6. Risks:

Major Risks

•Funding:o Unavoidable costs 89% of funding allocationo Inability to recruit/ develop high level skillso Replacement of ICT equipment and applicationso Enhancement of ICT capability

•Security

•Cyber crime and attacks

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Thank you

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fic strategic overview presentation to the standing committee on finance

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