1 financial intelligence centre amendment bill briefing to the portfolio committee on finance 6 may...
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FINANCIAL INTELLIGENCE FINANCIAL INTELLIGENCE CENTRE AMENDMENT BILLCENTRE AMENDMENT BILL
Briefing to the Portfolio Committee on Finance Briefing to the Portfolio Committee on Finance
6 May 20086 May 2008
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Structure of briefingStructure of briefing
Overview of the FIC A/B
The FIC A/B:
Most significant amendments
Brief clause by clause discussion
Implementation of the Bill once enacted and other related initiatives (schedules)
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BackgroundBackground The proposed amendments to the FICA are
urgently required to -
close regulatory gaps
effect improvements to certain provisions
provide for increased enforcement capabilities of the FIC and supervisory bodies
Though the improvement of our laws is an on-going process, there are a number of important interventions which can made at present
SUPERVISORY BODIES:FSB, Registrar of Banks, the Registrar of Companies,
the Estate Agents Board, IRBA, the National Gambling Boardand the Law Society of South Africa
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Global integration of financial sector activities have grown significantly since promulgation of FICA in 2001– Higher efficiency in the functioning of the financial
sector companies locally and abroad
Introduced new risks for the financial sector and challenges to the regulators– Creates efficient platform money-laundering – Cross-border regulatory arbitrage
Enhance regulatory regime to keep pace with global financial sector innovations– Close regulatory loopholes through an efficient
administrative framework
Background Background
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Objective of Bill Objective of Bill
The main objective of the Bill is to provide for an administrative enforcement framework to enhance supervision of and enforce compliance with the FICA Promotes regulatory efficiency by enabling prompt
corrective measures to remedy pressing risks
Follows the precedents of the "enforcement committee" as established in the Securities Services Act and the administrative penalties regime introduced in 2007 under the Pension Funds Act
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Objective of Bill Objective of Bill
Aims to ensure consistency with international standards for regulation, supervision and compliance with anti-money laundering and counter-terrorist financing measures
A limited number of technical amendments are also proposed to enhance legal certainty and clarity
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International contextInternational context
The Financial Action Task Force (FATF) on Money Laundering recommended that –
SA should give appropriate and adequate responsibilities and powers to supervisory bodies to enforce the FICA
this can be done by amending sector-specific legislation
In the South African context, however, it is more appropriate to provide for this authority in the FICA to ensure consistency in the enforcement powers afforded to supervisory bodies
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South African Context South African Context
Remind Committee of the principle Act and the reasons for the FIC Act 2001Creates a systemFATF standards as the backdropNeed to protect the system from mischievousness
and wiles of criminals Belief that supervisors have important role to monitor
financial system for anti-money laundering and counter-terrorist financing so that institutions not exposed to criminal acts
Supervisors have the responsibility but changes give the teeth to enforce
Failure to implement raises problems:Raises costs even further/ reputational damage
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South African Context South African Context
It is believed that this will improve the proper administration of the FIC Act and hence the effectiveness of the anti-money laundering and counter-terrorist financing regime, particularly in the compliance and enforcement areas
Extensive consultation over 18 months with incorporation of many views
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Concerns / difficulties Concerns / difficulties
The FICA currently provides for enforcement of its provisions through criminal sanctions only
Any contravention of or failure to comply with the Act constitutes an offence
Enforcement through criminal sanctions is lengthy and complex process
Criminal sanctions alone are inappropriate for measures that are, in fact, regulatory in nature
Criminal sanctions in respect of certain contraventions remain important, but an administrative enforcement process will –
prevent additional pressure on the formal justice system
provide a more flexible and efficient manner to address regulatory contraventions
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Concerns / difficulties Concerns / difficulties
The lack of express provisions establishing administrative enforcement structures –
impacts negatively on the proper administration of the FICA
limits the effectiveness of the anti-money laundering and counter terrorist financing regime, particularly in the compliance and enforcement areas
The draft Bill establishes an administrative enforcement framework to enhance supervision and compliance
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Administrative enforcementAdministrative enforcement The key features of the administrative
enforcement framework are: to clearly express the mandate of supervisory bodies to
supervise and enforce compliance with the obligations on accountable institutions regulated by them under the Act
to extend the powers and functions of the Centre to –enhance supervision and enforcement of compliance in a
coordinated and integrated manner together with supervisory bodies
fulfil the responsibilities of a supervisory body in respect of persons not supervised or regulated by a supervisory body in terms of a law
to empower the Centre and supervisory bodies to undertake inspections, issue directives, request information, impose administrative sanctions and apply to the Courts for an interdict or mandamus, where appropriate
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Administrative enforcement Administrative enforcement The key features of the administrative
enforcement framework are: (cont)
to ensure consistency in the enforcement powers afforded to supervisory bodies
to enhance cooperation and sharing of information between the Centre, supervisory bodies and law enforcement agencies
to create an appeal mechanism against decisions of the Centre or supervisory bodies
to provide for every accountable institution and every reporting institution to register with the Centre
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Consultation process Consultation process
A consultation document was circulated for comment in November 2006 to –
all supervisory bodies
the representatives serving on the Money Laundering Advisory Council for comment
The document was also placed on the Centre’s website inviting interested parties to comment by 26 January 2007
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Consultation process Consultation process
All comments received on the consultation document were considered and, where appropriate, incorporated into the draft Bill
Subsequent to the consultations referred to above, comments were received from the SARB, the FSB, SAPS, DoJ&CD and the JSE Securities Exchange
Amendments were thus subjected to a vigorous consultation process
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Comments / misconceptions Comments / misconceptions In general, recent comments focus on -
the perceived regulatory overlap between the Centre and supervisory bodies
the positioning of the Centre as a super regulator
available funding and resources to meet obligations imposed on supervisory bodies
the inappropriateness of certain institutions being listed as supervisory bodies
The legality / constitutionality of administrative sanctions
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Comments / misconceptions Comments / misconceptions
The perceived regulatory overlap between the Centre and supervisory bodies
the Centre may, where a person is subject to the jurisdiction of a supervisory body, exercise the administrative enforcement powers afforded in the draft Bill only afteronly after requesting the supervisory body to act and the latter fails to do so
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Comments / misconceptions Comments / misconceptions
The positioning of the Centre as a super regulator
the Centre is the central point in respect of money laundering issues in SA and must –
supervise and enforce compliance with the FICA and facilitate effective supervision and enforcement by supervisory bodies
monitor and give guidance to accountable institutions, supervisory bodies and other persons regarding the performance and compliance by them of their duties and obligations in terms of FICA
annually review the implementation of the FICA and submit a report thereon to the Minister
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Comments / misconceptions Comments / misconceptions
Available funding and resources to meet obligations imposed on supervisory bodies
the FIC A/B does not impose additional obligationsdoes not impose additional obligations on supervisory bodies
aims to enhance the ability of supervisory bodies to meet their existing supervisory obligations under the FIC A/B
achieved by creating a number of measures or tools that supervisory bodies may utilise to effectively enforce compliance with the FIC A/B, in addition to tools and measures afforded to them in their establishment legislation
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Comments / misconceptions Comments / misconceptions Available funding and resources to meet
obligations imposed on supervisory bodies (cont)
NT and the Centre acknowledge that the capacity and expertise of certain supervisory bodies must be improved to ensure the effective enforcement of the FICA
the FIC is assisting a number of supervisory bodies with training and capacity building
Centre is preparing an implementation plan to facilitate the phased implementation of the FIC A/B
the draft Bill empowers a supervisory body to use any levies or charges it is authorised to impose or collect in accordance with other laws to defray expenditure incurred in performing its obligations under the FICA
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Comments / misconceptions Comments / misconceptions
The inappropriateness of certain institutions being listed as supervisory bodies
Not a matter for the Bill as legislative authority to amend the Schedules to the FICA has been delegated to the Minister
Centre undertaking review of Schedules to ensure appropriate listing of supervisory bodies
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Comments / misconceptions Comments / misconceptions
The legality / constitutionality of administrative sanctions
Same issues were mooted with the introduction of the administrative penalties regime in 2007 under the Pension Funds Act
Independent SC opinion, Parliamentary Law Advisors and the Office of the State Law Advisor advised that administrative penalties are constitutional and legal
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Contact details Contact details NATIONAL TREASURYNATIONAL TREASURY
Nkosana MashiyaChief Director: Economic Policy and
International Financial [email protected]
Tel: (012) 315 5825
Jo-Ann FerreiraChief Director: Public Entities Governance Unit
[email protected]: (012) 315 5263
Raadhika SookooDirector: Economic Policy and International
Financial [email protected]
Tel: (012) 315 5671
FINANCIAL INTELLIGENCE CENTREFINANCIAL INTELLIGENCE CENTRE
Murray MichellDirector: Financial Intelligence Centre
[email protected]: (012) 309 9210
Pieter SmitSenior Manager: Legal and Policy
[email protected]: (012) 309 9215
Poovindree NaidooSenior Legal and Policy [email protected]
Tel: (012) 309 9423
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QUESTIONSQUESTIONS
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THANK YOUTHANK YOU