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Financial Intelligence Centre Amendment Act – Foreign and Domestic Prominent Influential Persons

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Financial Intelligence Centre Amendment Act – Foreign and Domestic Prominent Influential Persons

10th November 2017

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The FICA Amendment Act No 2 of 2017 (“the Act”) provides further protection of the South African financial system against abuse for illicit purposes. The Act has introduced new requirements requiring greater due diligence when dealing with persons who are prominent and influential domestically, as well as foreign prominent public officials. An accountable institution must determine whether a prospective client with whom it engages to establish a business relationship, or the beneficial owner of that prospective client, is a domestic or foreign prominent influential person; an immediate family member of such a person; or a known close associate of such a person.

Foreign Prominent Public Official
The definition of a foreign prominent public official incudes persons who hold or have held, at any time in the preceding 12 months, in any foreign country, a prominent public function which includes

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  • Head of State or head of a country or government;
  • Member of a foreign royal family;
  • Government minister or equivalent senior politician or leader of a political party;
  • Senior judicial official;
  • Senior executive of a state-owned corporation; or
  • High-ranking member of the military.

If an accountable institution finds out that it is dealing with a foreign prominent public official, senior management approval must be obtained to establish the business relationship. They must also take reasonable measures to establish the source of wealth and source of funds of the client, and conduct enhanced ongoing monitoring of the business relationship. These requirements also apply to immediate family members and known close associates of such prominent public officials.  The accountable institution must conduct enhanced ongoing monitoring of the business relationship.

Domestic Prominent Influential Persons
For purposes of the Act, a domestic prominent influential person is defined as an individual who holds, including in an acting position, for a period exceeding six months, or has held at any time in the preceding 12 months, a list of positions included in Schedule 3A of the Act. It includes positions such as:

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  • A prominent public function, this includes the function of President, Minister, Premier and others;
  • A top position in a company dealing with an organ of state where a company provides goods and/or services to an organ of state with a transactional value in excess of an amount determined by notice in the Government Gazette;
  • Heads of international organisations;
  • A person who holds the position of head, or other executive directly accountable to that head, of an international organisation based in South Africa.

Family members and known close associates
As already mentioned, the enhanced due diligence requirements, to be applied in respect of domestic prominent influential persons, also apply in respect of their immediate family members and known close associates.
Close associates are individuals who are closely connected to a prominent person, either socially or professionally. Immediate family members for these purposes include the following:

  • The spouse, civil partner or life partner;
  • The previous spouse, civil partner or life partner, if applicable;
  • The children and stepchildren and their spouse, civil partner or life partner;
  • The parents; and
  • The siblings and step-siblings and their spouse, civil partner or life partner.

Accountable institutions are required to determine if they are dealing with a family member or known close associate of a prominent person, regardless of whether the prominent person is a client of the accountable institution or not.

Conclusion
These provisions provide for more enhanced due diligence when dealing with prominent influential person to ensure there is no illicit activities. Accountable institutions are required to investigate and record who they are establishing business relationships with to ensure a more transparent financial system.

Written by Sixolile Timothy, Professional Assistant, Attorney, Schoeman Law

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