COVID-19: COMMUNICATION TO SOUTH AFRICAN ACCOUNTABLE INSTITUTIONS
The Prudential Authority, the National Payment System and Financial Surveillance Departments of the South African Reserve Bank and the Financial Sector Conduct Authority (jointly referred to as the Authorities), in consultation with the Financial Intelligence Centre (FIC), have published Joint Communication 2 of 2020 (Communication).
The Communication focuses on the possible impact of COVID-19 on South African accountable institutions (AI), and on their ability to adhere to their obligations regarding customer due diligence, specifically ongoing customer due diligence, in terms of section 21C of the Financial Intelligence Centre Act, 2001 (FICA).
The Communication does not have the force of law and is intended to indicate the Authorities’ supervisory response to the COVID-19 pandemic, in the context of the Communication. As such, the Communication has been issued expressly without prejudice to the supervisory and enforcement powers of the Authorities in terms of FICA.
The Communication confirms the Authorities’ support for the stance taken by the Financial Action Task Force (FATF) as published by the FATF on 1 April 2020, available here, which encourages the use of technology, such as Fintech, Regtech and Suptech to the fullest extent possible. AIs are urged to have regard to the FATF Guidance on Digital ID, available here, which highlights the benefits of trustworthy digital identification.
The Communication encourages AIs to explore the use of digital identification tools, as may be appropriate, while still properly managing risks in terms of money laundering, terrorist financing and proliferation financing (ML/TF/PF risks).
The Authorities expect AIs to prioritise ongoing due diligence requirements regarding high and medium risk customers as per the requirements of FICA. When AIs identify clients that present lower ML/TF/PF risks, however, the provisions of FICA allow for simplified due diligence measures to be undertaken at onboarding, which may help AIs to adapt to the current situation imposed by the nationwide lockdown. The Authorities therefore expect AIs to seek to utilise technology to the greatest extent possible to achieve compliance with ongoing due diligence obligations.
The Authorities expect there to be no freezing or closure of accounts of affected existing clients due to the inability of AIs to obtain identification and verification information or to procure other information as may be required to conduct requisite ongoing due diligence.
The Authorities further expect AIs to have already commenced with planning and discussions as to how those affected existing clients will be dealt with after the lockdown period and, significantly, to communicate plans, with requisite deadlines for completion, in writing to their relevant supervisory body by no later than 15 May 2020 (e.g. in the case of financial services providers, to the Financial Sector Conduct Authority; in the case of banks, to the Prudential Authority). These plans are required to provide for completion dates that do not extend beyond 4 December 2020.
Insofar as reporting is concerned, should a reporting entity, owing to extenuating circumstances, be unable to timeously report a particular suspicious and unusual transaction in terms of section 29 of the FICA, or file a report in terms of section 28A of the FICA, the entity may apply to the FIC in terms of Regulation 24 of the Money Laundering and Terrorist Financing Control Regulations, for an extension of the applicable reporting period.
A copy of the Communication can be accessed here.