FIC: SA’s Heightened Terrorist Financing Risk

FIC: SA’s Heightened Terrorist Financing Risk

• 01 August 2024
• Regulatory Compliance and Legislation
• South African Accounting Academy

South Africa, as a regional financial and trading hub, has been placed on high alert following the release of the updated TF NRA on 24 June 2024.

The revised national assessment – published by the Anti-Money Laundering (AML) Counter Terrorist Financing (CFT) NRA Inter-Departmental Working Group (IWG) – raised South Africa’s terrorist financing risk from ‘moderate’ in 2022 to ‘high’ as of 2024.

The TF NRA provides a list of key vulnerabilities that may be used to facilitate terrorist financing. These vulnerabilities are listed in the publication.

As part of the FIC control measures, the 3 principles of money laundering detection and investigation should be adhered to, namely: that intermediaries in the financial system must know with whom they are doing business; the audit trail of transactions through the financial system must be preserved; and transactions that may be linked to terrorist financing must be brought to the attention of the FIC and the investigating authorities.

Accountable institutions must take note of their reporting obligations to the FIC. The three main regulatory reporting streams for accountable institutions are:

• Cash threshold reports
• Suspicious and unusual transaction reports
• Terrorist property reports
• International fund transfer reports

Accountable institutions must submit terrorist property reports (TPRs) when they become aware that they possess property or are in control of property of a person or entity that is designated on a United Nations Security Council targeted financial sanctions list. The consolidated targeted financial sanctions list is accessible on the FIC website. FIC Guidance Note 6A provides guidance on TPRs.

Accountable institutions must adopt the “scrutinize-hit-freeze-report” approach in complying with their TFS obligations.

The TF NRA is available on https://www.fic.gov.za/wp-content/uploads/2024/06/National-risk-assessment-%E2%80%93-Terrorist-financing-national-risk-assessment-2024.pdf

Click here to download the Media article:

https://www.fic.gov.za/wp-content/uploads/2024/07/2024.7-GN-Sunday-Times-advertorial-2024.pdf

Relevance to Auditors, Independent Reviewers & Accountants:

• The Financial Intelligence Centre Act (FICA) is yet another piece of legislation that your clients must comply with, and which you must assess compliance with.  If they don’t comply with the relevant laws and regulations, you have certain reporting obligations in terms of NOCLAR (NOn-Compliance with Laws And Regulations) – this could include reporting to management, qualifying your audit opinion, reporting a Reportable Irregularity, etc.
• As an auditor and independent reviewer, you need to consider amendments, regulations, guidance and directives that are gazetted relating to FIC and accountable institutions, to ensure that your clients (or even your own practice) comply with their reporting obligations.
• As an accountant, you may need to advise your clients who are accountable institutions on compliance with the PPA and adherence to the latest guidelines and notifications issued by the FIC – specifically due to the heightened terrorist financing risk.

Relevance to Your Clients:

• Relevant entities (specifically accountable institutions) have a duty to comply with the FIC Act, otherwise they could be held liable.
• Relevant entities should be aware of amendments, regulations, guidance and directives that are gazetted relating to FIC and accountable institutions, to ensure that they comply with their reporting obligations.
• Your clients who are accountable institutions, must adhere to the latest guidelines and notifications issued by the FIC – specifically due to the heightened terrorist financing risk.

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