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What is the impact of the withdrawal of
exemptions under FICA?

September 2017

“I’m responsible for FICA at my accounting firm. With the
possibility of certain of the exemptions issued in terms of the
Financial Intelligence Centre Act being withdrawn by the new
Commercial amendment act, I’m worried that our firm will now have to
comply with all areas of FICA. Will this be the position?”

You are correct in that it appears that changes brought about by the
Financial Intelligence Centre Amendment Act 1 of 2017 (“Amendment
Act”), have lead to the withdrawal of many of the exemptions previously
approved under the Financial Intelligence Centre Act 38 of 2001 (“FICA”).
The Amendment Act introduces a risk-based approach as an integral
element to complying with FICA. This approach makes these exemptions
redundant as these exemptions are now implicitly included in the
provisions of the Amendment Act and will need to be addressed in
an accountable institution’s Risk Management and Compliance
Programme (“RMCP”).

While the Amendment Act requires accountable institutions to obtain
more information from clients than before, it at the same time allows
accountable institutions greater flexibility to themselves to determine the
extent of customer due diligence to be conducted based on the risk
relating to a specific client. This assessment should be carried out by
taking into account the money laundering and terrorist financing risks
posed in relation to the client, the products and services rendered to the
client as well as other relevant factors.
The content of the exemptions may therefore still act as a guide to
accountable institutions in order to determine the suitable verification
measures to be taken in accordance with its RMCP. This basically means
that, the higher the risk, the more questions will need to be asked and
the more documents should be collected by the accountable institution
in order to ensure that the client’s information is correct. In cases of lower
risk clients, simplified measures may be applied.
Although many of the exemptions have been withdrawn, it is clear
that they remain relevant and that it is important for accountable
institutions to obtain professional advice to ensure compliance with
the Amendment Act. Our advice is to contact an attorney to assist you
with your RMCP and to ensure that such is in line with the new legal
framework established by the Amendment Act.

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