financial intelligence centre republic of south africa standing committee for finance 17 november...

financial intelligence centre REPUBLIC OF SOUTH AFRICA

STANDING COMMITTEE FOR FINANCE

17 November 20091

financial intelligence centre REPUBLIC OF SOUTH AFRICA 1. The AML/ CFT Generic System

2. South Africa’s AML/ CFT system

3. The Financial Intelligence Centre

4. Strategic objectives

5. The Financial Intelligence Centre’s Annual Report 2009

AGENDA

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The AML/ CFT Generic System

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The generic AML/CFT value chain

Business Compliant

& Supervised

BusinessCommunity

Received by the

FIU

Analysis of Info & against

databases

Referto law

enforcement agencies

Investigation &

Prosecution

• These are a set of Dependencies in which there are:oClose working relationshipsoCollaboration is needed for successful impact

The anti-money laundering (AML) and combating of terror financing (CTF) system can be described as a value chain which includes a range of various

players

4


The System: Elements in an AML/ CFT systemThe system incorporates the following elements:

1.Criminalisation: of money laundering and financing of terrorism

2.Administrative preventative measures: to be taken by financial institutions and non-financial businesses and professions – reporting requirements (eg suspicious transactions, cash threshold, terror finance); customer due diligence/ Know Your Customer; record keeping; staff training; appointment of compliance officer; sanctions for non-compliance.

3.Law enforcement: must have the legal capacity to investigate and prosecute and other measures; availability of resources.

4.Financial Intelligence Unit must be established to receive data, analyse and refer to law enforcement. It must function independently and be properly resourced.

5.International cooperation: mutual legal assistance, extradition, and information sharing.

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Benefits of AML/ CFT system

6.For country, generally : good governance and integrity of institutions leads to: • enhanced financial market stability;• costs of borrowing (credit ratings) lower;• increased investor confidence;• facilitates trade, commercial activities and banking;• increased revenue collection; and• thus a sounder basis for economic & social development.

7.For the business community: • compliance culture of financial institutions and business indicates soundness

and integrity; and• reinforces above by helping to reduce market distortions, promote investor

confidence, reduce cost of borrowing.

8.For the law enforcement community: • impacts on organised crime and terrorist networks, reduces crime; and• has impact on reducing financial crime.

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South African Component of the AML/ CFT system

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• Centre’s legislative mandate is to assist in identifying the proceeds of crime and combating money laundering and terror financing

• The Centre is responsible for creating systems and processes to: - To ensure that criminals who seek to abuse financial institutions areidentifiable and are, in fact, identified; and to - Protect financial institutions from being abused by criminals

seeking to launder the proceeds of their crimes or fund terrorist activities through their implementation of various administrative measures.

• Centre’s functions place it at pivotal point between the business community and supervisory bodies, and law enforcement agencies and prosecutors.

Centre’s role in the SA’n AML/ CTF architecture

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AML/ CFT Architecture

Bank

Insu-rance

Casino

SAPS

NPA

SARS

Accountable Institutions eg

Investigative Authorities & Intelligence

Agencies, e.g..

Investigations & Prosecutions

Data storageAnalysisReferrals

InternationalLinks/ FIU’s

Centre sharing

Su

per

viso

ry B

od

ies

(FS

B, S

AR

B, J

SE

, etc

)M

onito

r C

ompl

ianc

e of

Acc

ount

able

Ins

t’s

International Standard – Financial Action Task Force 40+9 Rs

Po

licy &

cou

ntry eval

Intellig

ence A

gen

cies

ReferralsRequests

ReportsRequests

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Accountable institutions

Insurancesector

Casinos

Banks

Suspicious Transaction Reports sent to the Centre

Financial and other institutions most vulnerable to money laundering –

• 19 categories of different institutions – eg. banks, insurance industry, casinos, financial advisors, lawyers, estate agents

Centre

– Data storage

– Analysis– Referrals

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Supervisory Bodies

• Supervisory bodies listed in Schedule 2 of the FIC Act– The Financial Services Board; SA Reserve Bank; Companies

and Intellectual Property Registration Organisation; Estate Agency Affairs Board; Independent Regulatory Board for Auditors; National Gambling Board, JSE Securities Exchange, & SA Law Society.

• Obliged to monitor the level of compliance by accountable institutions

• The FIC as a supervisor– The Centre is obligated to act as ‘supervisor of last resort’

where no supervisor exists; and

• The Centre conducts compliance reviews on accountable institutions with supervisory bodies, or on its own.

• Amended FIC Act will give supervisors administrative enforcement powers

Banks

Insurancesector

Casinos

Mo

nito

r Co

mp

liance

SupervisoryBodies

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Law Enforcement Authorities

- Data capture- Analysis- Reports

SAPS

NPA

SARS

SASS

NIA

Referrals sent from the Centre

The Law Enforcement Agencies are empowered to:

1. Investigate cases involving proceeds of crime2. Prosecute cases3. Receive referrals from the Centre4. Make requests to the Centre for additional

information5. Appoint Authorised Officers

o To protect integrity of information6. Provide access to government databases to

verify informationo Ability to search criminal databases

7. Ensure regular feedback on progress made in investigations and prosecutions

8. Collect and report statistics

Centre

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FATF/ESAAMLG and South Africa

• Financial Action Task Force (FATF) is the international standards-setting and policy-making body to combat money laundering and financing of terrorism

• Eastern and Southern Africa Anti-Money Laundering Group (ESAAMLG) is the FATF-style Regional Body which aims to promote the implementation of policies and practices against money laundering and terror financing in accordance with international standards within the region

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FATF/ESAAMLG and South Africa

• South Africa is a member of both FATF and ESAAMLG which means that that the country has committed itself at a political level to participate in the activities of FATF and ESAAMLG and to align its policies with actions of FATF and ESAAMLG

• In the context of FATF this includes:o Implementing standards and best practices to combat money

laundering and terror financing, and

o Implementing FATF decisions e.g. in response to G20 decisions concerning global financial and economic crisis

• These impact on policies and actions of the South African government in areas connected with combating money laundering and terror financing

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FATF and ESAAMLG Mutual Evaluation

1. South Africa underwent mutual evaluation (peer-review) process over a period of about 12 months by FATF and ESAAMLG to measure implementation of international standards against money laundering and terror financing

2. The Evaluation Report commented favourably on the work South Africa has done thus far in developing measures against money laundering and terror financing

3. Evaluation led to recommendations for improvements to the system against money laundering and terror financing in areas such as:

a. Increased priority to be given to money laundering investigations & prosecutions relative to underlying profit generating offences

b. Legislative improvements (e.g. amendments to FIC Act etc. to improve customer due diligence provisions in line with new standard)

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Mutual Evaluation continued

c. Improved powers for supervisors to supervise and enforce compliance should be improved and increased action by supervisors to ascertain compliance levels & sanction non-compliance among financial and non-financial institutions

d. Extending the scope of the measures against money laundering and terror financing by including additional categories of institutions

e. Improvement on transparency of the ownership and control structures of legal persons and trusts

f. Developing unique SA trend & typology reports, case studies & best practices

4. Steps to improve areas identified by FATF cut across wide range of government departments and agencies

5. The Centre will be centrally responsible for coordination of this process and reporting back to FATF on progress by February 2011

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• The Egmont Group is an organisation of 116 FIU’s which aims to:o improve interaction on communicationso information sharing, and training coordination.

• Provide technical assistance

• The Centre has 22 MOU’s in place to facilitate information exchange with foreign FIU

• Six (6) MOU’s are held within the SADC region

The Egmont Group

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The Financial Intelligence Centre

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Accountability and location

• The Financial Intelligence Centre is defined as a juristic person;

• It is a PFMA Schedule 3A entity;

• Accountable directly to Minister of Finance; and is

• Funded from national budget.

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Core Responsibilities

1. Analyses information obtained in reports from ‘accountable institutions’;

2. Refer information to Law Enforcement Authorities - eg. SAPS (DPCI - Hawks), AFU, SARS, Intelligence Services;

3. Coordinates SA’s policy on AML/ CFT - liaises closely with National Treasury, other gov depts and all stakeholders in public and private sector and internationally;

4. Monitors and give guidance to the Supervisory Bodies (SARB, FSB, NGB, etc), accountable institutions and others;

5. Monitors and inspects for compliance where no supervisory body exists, eg. parastatals, Post Bank;

6. Exchanges information with similar bodies in other countries – other financial intelligence units;

7. Leads SA participation in the standard-setting body FATF and its regional body ESAAMLG; and

8. Participates as a member of Egmont Group of financial intelligence units (along with 115 other countries)

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COMPLIANCE AND PREVENTION

Liaises and Inspects for compliance of• Accountable institutions• Supervisory Bodies• Non-supervised accountable

institutions• Capacity building, such as develop‘FIC Academy’

Public Awareness• Provides awareness and training

MONITORING & ANALYSIS

Analyses and Refers• Collects & stores STRs and other

reports• Analyses data and adds value• Develops referrals to law

enforcement• Exchanges information with

international FIUs and lawenforcement agencies

• Maintains statistics

ADMINISTRATION & SUPPORT SERVICESProvides various support functions and services to the Centre, including:

• Financial and Administrative management; Procurement; Human Resources; • Registry and document storage services; Training and development; Security services; • Communication and marketing; Legal services; • Information & Communication Technology;

LEGAL & POLICY

Administers Act and Develops coherent policy framework• Develops legislation• Liaises with standards setter: FATF

and ESAMMLG• Monitors typologies and trends• Liaises with National Treasury &

other relevant governmentdepartments

• Liaises with MLAC and providesadmin support

DIRECTOROversees policy & strategic direction, is the Centre’s Accounting Authority• Communication/ Press liaison• Strategic Research

FIC structure and staffing components

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Staffing complement

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Strategic Objectives: 2009 - 2012

1. The Centre is a sustainable and a capable institution;

2. Information from the Centre (proceeds of crime - ML & TF) is recognised & used by law enforcement as being relevant and of high quality;

3. Stakeholders have an increased understanding of the Centre – mandate, functions and responsibilities;

4. Increased awareness of AML/ CFT vulnerabilities and threats and need for prevention;

5. Vulnerable institutions have a culture of compliance thus reducing their abuse by criminals or terror financiers;

6. Maintain a robust legal framework to combat money laundering a terror financing; 23


1. Improved consumption and use of the financial intelligence products from the Centre by law enforcement agencies;

2. Establishment of strategic partnerships with specialised units of law enforcement agencies;

3. Design and implement a framework for Cash Threshold Report (CTR);

4. Review financial transaction reporting procedures to optimise Cash Conveyance Reporting (CCR).

5. Facilitate the Administrative Enforcement function among supervisory bodies

Strategic objectives

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6. Review and make proposals to update the FIC Act in order to improve the country’s framework to combat money laundering and terror financing

7. Engaging with international and regional policy making bodies on money laundering and terror financing

8. Roll out of next generation ICT infrastructure and capability

9. Pilot an IT replicable model at all infrastructure levels

10. Provide IT Technical Assistance to neighbouring countries.

Strategic objectives (cont)

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Annual Performance: 2008/2009

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Achievements

• The Centre has received a total of 112 829 suspicious transaction reports, commonly known as “STRs”, since 2003.

• During the 2008/ 2009 financial year, 22 762 STR’s were received

and 1 221 referrals were made to the law enforcement authorities.

• The value of these referrals amounted to nearly R6 billion, which represents a 195% increase year-on-year.

• Centre conducted 235 joint audit reviews of businesses and 30 independent audits of post office branches

• Increase in quality reporting from sectors subject to audits

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• A successful peer review assessment - Mutual Evaluation - was concluded in February by the Financial Action Task Force (FATF) and the Eastern and Southern Africa Anti-Money Laundering Group (ESAAMLG).

• Amendments to the FIC Act were completed and draft regulations have been under preparation.

• Creating infrastructure and capability to give effect to the changes envisaged.

• Next-generation ICT systems have been designed and completed, and a roadmap developed for future ICT enhancements.

• To date the Centre has received unqualified audit reports from the Office of the Auditor-General.

Achievements

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FINANCIAL HIGHLIGHTS 31 MARCH 2009

% increase

y-on-y2009

R ,000% exp

2008R ,000

% exp

Operating expenses

Audit fees 12.40% 645 0.65% 565 0.94%

Audit Comm fees 30.32% 155 0.16% 108 0.18%

Admin expenses 42.38% 27,728 28.10% 15,978 26.72%

Dep & amortisation 74.88% 6,456 6.54% 1,622 2.71%

Int travel expenses 45.26% 1,942 1.97% 1,063 1.78%

Personnel expenditure 27.71% 47,363 48.01% 34,241 57.27%

Prof fees 56.77% 14,370 14.57% 6,212 10.39%

Total operating expenditure 39.40% 98,659 100.00% 59,789 100.00%

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Capital expenditure PPE, Intangible assets and leased assets -43.30%

15,484

22,189

14,143 81,978

Approved baseline

44,600

42,480

Adjusted earnings

66,874 -

Total transfers for the year

111,474

42,480 % of actual (excl non-cash) on transfers 96.60% 189.16%

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Focus areas

1. More effective supervision of accountable institutions

2. Implement administrative enforcement measures

3. Increased collaboration with national bodies to support the strategy to combat money laundering and terror financing

4. Expanded national footprint for the Centre

5. Review of the legislative framework

6. Continued development of integrated ICT infrastructure

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THANK YOU

Murray MichellDirector: Financial Intelligence Centre

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financial intelligence centre republic of south africa standing committee for finance 17 november...

Documents

centre mandate

centre proceeds of crime

strategic objectives

money laundering

coherent policy framework

terror financingroll

terror financiersmaintain

terror financingengaging