Page 95 - Profiles's Unit Trusts & Collective Investments - September 2024

Legislation and Guidelines

Are you an “Accountable Institution”?
FICA lists a number of “accountable institutions”. One of them is “A person who carries on the
business of rendering investment advice or investment broking services, including a public accountant
as defined in the Public Accountants and Auditors Act 80 of 1991, who carries on such a business.”

FICA complements the Prevention of Organised Crime Act (POCA) which specifically criminalises
money laundering. POCA, however, does not place any KYC (Know Your Client) or reporting
obligations on banks or other entities which may be used by criminals in money laundering (ML) or
terrorist funding (TF) activities. These requirements were introduced under FICA.
The original FICA has been amended a few times to ensure South African money laundering
legislation remains in line with international best practice. The most recent amendments in 2022
and 2023 were aimed at ensuring FICA is in line with the recommendations of Financial Action
Task Force (FATF), an initiative of the G7, based in Paris, that was established in 1989.
Accountable Institutions
FICA defines a broad range of entities involved in financial transactions as accountable institutions.
The list includes, amongst others, banks, real estate agents, investment managers (including collective
investment schemes), forex dealers, casinos, attorneys, long term insurers, and stockbrokers.
In December 2022 the range of accountable institutions was broadened to include more credit
providers, dealers in high-value goods (over R100 000), people who assist in setting up companies
local or foreign companies, people, including trustees, who assist in setting up trusts, the South
African Mint Company, crypto-asset service providers, informal money or value transfer providers
(hawaladars), and payment clearing service operators.
Motor vehicle dealers and dealers in Kruger Rands that were previously reporting institutions
only are now also accountable institutions.
Accountable institutions are required to report suspicious transactions and tax evasion to the
Financial Intelligence Centre (FIC) and their compliance is monitored by supervisory bodies,
whereas reporting institutions report directly to the FIC.
FICA places onerous duties and obligations on all accountable institutions. These include:
The establishment and verification of the identities of clients
Maintenance of detailed records about clients, business relationships and transactions
An obligation to make such records available to FIC
An obligation to inform FIC, on request, of the existence of a current or past mandate
An obligation to report suspicious transactions
FICA stipulates that any person who carries on a business, including a manager or employee, who
knows or suspects certain transactions may be of a suspicious or unusual nature, is obliged to report
this to the FIC. Even more burdensome is the obligation to report on a potential transaction even if
this comes to nothing (ie, where there is an enquiry with an accountable institution but no
transaction takes place). To complicate the relationship between service providers and clients,
there is also in the Act a prohibition against disclosure by the reporting person that a report to FIC
has been made.

Risk-Based Monitoring
As mentioned above, the FICA amendments promulgated in 2017 have shifted the process of
monitoring and reporting clients and transactions from a rules-based approach to risk-based approach.
Under the 2003 FIC Act, accountable institutions were required to establish internal rules to
ensure compliance with the legislation. An entity’s rules included the process of appointing a
compliance officer, definitions of the information to be recorded and stored in respect of each
client, staff training regimes, and the steps to be taken in the event of suspicious transactions.
Following the implementation of the amendments, accountable institutions must now assess
the potential risks of each client and every transaction in the context of each account’s history. For
example, an entity’s rules may have required staff to alert compliance about any large transaction

Profile’s Unit Trusts & Collective Investments — Understanding Unit Trusts 93