Page 97 - Profile's Unit Trusts & Collective Investments - March 2025

Legislation and Guidelines

asked the source of the funds by the teller and leaves with the money still in his possession. This
would be reportable under section 29.

Know Your Client (KYC) and Client Due Diligence (CDD)
Central to FICA are provisions which place an obligation on FSPs and FSPRs to identify and
verify their clients. If a client is acting on behalf of another person or entity, the Act requires the
accountable institution to establish and verify the identity of the third party, and to verify that the
client has the authority to act on behalf of the third party.
The FICA amendments expand on the previous KYC requirements with the introduction of
Client Due Diligence (CDD) provisions. Like KYC, CDD imposes an obligation on accountable
institutions to know who their clients are and who they are doing business with, but CDD also
requires institutions to monitor business relationships and to take special care when it comes to
prominent and influential persons. The amendments also introduce additional measures relating
to trusts, partnerships, and other legal entities.
Under FICA, accountable institutions typically require a written application for service
accompanied by certain supporting documentation. For a South African citizen or resident, typical
requirements include:
A copy of the investor’s identity document showing the ID number and photograph (or
passport copy for foreign nationals)
Proof of SA income tax number (ie, correspondence from SARS showing name and tax number)
Proof of residential address (such as a bank statement, utility bill or telephone account)
Guardian contact details in the case of a minor
Proof of banking details (such as a bank statement less than three months old)
A recent amendment to FICA, has made accountable institution responsible for determining
who has control and ownership of a company, trust or other legal entity. This means the
institution must determine all natural persons who own or have control over the entity.
Where the client is a company or trust or other legal entity, documentary evidence can become
significant as it may include the above details for all directors and senior managers, proof of a
trading name (where applicable), proof of VAT registration, proof of the physical address where
the entity conducts its operations, and so on. In the case of trusts, details of all trustees and all
beneficiaries may be required.
Risk Management and Compliance Programme
The amended FICA requires every accountable institution to draw up a Risk Management and
Compliance Programme (RMCP). In terms of the amendments to the original Act, the RMCP
replaces the Internal Rules required by the 2003 iteration of FICA.
The risk-based approach is less rigid than the rules-based approach. The latter often resulted in
a disparity between the amount of effort required to comply with FICA and the level of risk
represented by particular clients and transactions. Under the amended Act, accountable
institutions are able to tailor the processes they implement to satisfy the FICA requirements in
accordance with entity-specific risk profiles. Such entity-appropriate processes are defined in the
RMCP, which the FIC guidance notes describe as “the foundation of an accountable institution’s
efforts to comply with its obligations under the FIC Act on a risk sensitive basis”.
The systems and controls used to manage ML/TF risks must be documented in each
organisation’s RMCP. The Act requires the RMCP to specify, inter alia, how the accountable
institution will:
Establish and verify the identities of clients and associated persons
Distinguish between actual clients and prospective clients
Determine if a prospective client is a foreign prominent public official or domestic
prominent influential person
Ensure that it does not deal with anonymous or fictitious customers

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