South Africa is a member of the Financial Action Task Force (FATF) and adheres to its guidelines and recommendations in the international fight against money laundering activities.
There is no common law legal duty to report crime in South Africa. The thrust of the aforementioned acts is to place statutory duties on certain accountable and reportable institutions and individuals to assist in the fight against local and ultimately international money laundering activities. Intentional or negligent non-compliance with the statutory obligations subjects the accountable or reportable institution or individual to a real threat of criminal prosecution and potentially large monetary fines or imprisonment.
FICA, in addition to creating obligations regarding “Know your client” and procedures to indentify suspicious transactions, identifies certain reportable and accountable institutions being obliged to report known or suspicious transactions of money laundering to the Financial Intelligence Centre (FIC). These institutions, apart from the conventional banking institutions include among others attorneys, pension funds, pension fund administrators, insurance companies or their agents/brokers, estate agents, casinos, public accountants, if they are providing investment advice, and members of the stock exchange. Reportable institutions are listed as people who carry on the business in dealing in motor vehicles and those dealing in the business of selling and buying Kruger Rands.
The obligation to report is triggered when an accountable, reportable institution or individual either has actual knowledge or reasonably suspects that it has received, is about to receive or will facilitate receiving or moving proceeds of unlawful activity including money laundering.
Exactly what constitutes a reasonable suspicion, and whether there is an obligation to report, is a factual question and determined by the facts of each matter. The test is whether a reasonable person in the position of the person who has the obligation to report would have considered the transaction to be suspicious or would have obtained the necessary information to satisfy him/herself whether the transaction is suspicious. If a reasonable person would have, then if the person responsible did not do so, that person may be subject to prosecution in terms of FICA. The sentences for non-compliance is imprisonment not exceeding 15 years or a fine not exceeding ZAR10 million.
The main anti-money laundering provisions are contained in POCA, more particularly Chapter 3, Sections 4, 5 and 6. In broad terms, Section 4 criminalises the actions of any person who enters into an agreement or an arrangement whereby they assist another person to conceal or disguise or to avoid prosecution regarding property, which they know or ought to have reasonably known, is the proceeds of a crime.
In broad terms, Section 5 criminalises the actions of a person who assists another to benefit from the proceeds of his or her unlawful activity by allowing or assisting that person to retain the control of the proceeds of the unlawful activity or to assist that person to convert the unlawful proceeds into funds.
In broad terms, Section 6 criminalises the actions of any person who either acquires, possesses or uses any property in circumstances where they know or ought to reasonably have known that that property forms the proceeds of unlawful activity.
Section 8 provides that any person who is convicted of an offence contemplated in Sections 4, 5 or 6 can be fined an amount not exceeding ZA100 million or be sentenced to a period of imprisonment not exceeding 30 years.
PACCA in Part 6 of Chapter 2 also deals with the reporting responsibility for money laundering transactions. Section 20 relates to a person being an accessory to or after an offence, which would include the offence of money laundering. However, Section 20 is narrower in its application than the provisions under POCA. Section 20 only criminalises the actions of any person who has actual knowledge (as apposed to a reasonable suspicion) that the property is the proceeds of unlawful activity and enters into any dealing with regards that property or holds, receives or conceals such property. Such a person can be sentenced in a High Court to a fine or imprisonment for a period not exceeding 10 years or in a Magistrate's Court to a fine or imprisonment for a period not exceeding three years.
In addition, Section 34 of Chapter 7 of PACCA imposes a general duty to report corrupt transactions. Such a duty rests on any person who holds a position of authority and who knows or ought reasonably to have known or suspected that any other person has committed the offence of inter alia money laundering but also, common law offences of theft, fraud, extortion, forgery or uttering a forged document involving an amount of ZAR100 thousand or more.
In terms of Section 34(4) the following people hold a position of authority other than public organisations and government officials. These are:
• The head, rector or principal of a tertiary institution.
• The manager, secretary or director of a company as defined in the Companies Act of 1973 and includes a member of a Close Corporation as defined in the Close Corporations Act of 1984.
• The executive manager or any bank or other financial institution.
• Any partner in a partnership.
South Africa is a member of the Financial Action Task Force (FATF) and adheres to its guidelines and recommendations in the international fight against money laundering activities.
There is no common law legal duty to report crime in South Africa. The thrust of the aforementioned acts is to place statutory duties on certain accountable and reportable institutions and individuals to assist in the fight against local and ultimately international money laundering activities. Intentional or negligent non-compliance with the statutory obligations subjects the accountable or reportable institution or individual to a real threat of criminal prosecution and potentially large monetary fines or imprisonment.
FICA, in addition to creating obligations regarding “Know your client” and procedures to indentify suspicious transactions, identifies certain reportable and accountable institutions being obliged to report known or suspicious transactions of money laundering to the Financial Intelligence Centre (FIC). These institutions, apart from the conventional banking institutions include among others attorneys, pension funds, pension fund administrators, insurance companies or their agents/brokers, estate agents, casinos, public accountants, if they are providing investment advice, and members of the stock exchange. Reportable institutions are listed as people who carry on the business in dealing in motor vehicles and those dealing in the business of selling and buying Kruger Rands.
The obligation to report is triggered when an accountable, reportable institution or individual either has actual knowledge or reasonably suspects that it has received, is about to receive or will facilitate receiving or moving proceeds of unlawful activity including money laundering.
Exactly what constitutes a reasonable suspicion, and whether there is an obligation to report, is a factual question and determined by the facts of each matter. The test is whether a reasonable person in the position of the person who has the obligation to report would have considered the transaction to be suspicious or would have obtained the necessary information to satisfy him/herself whether the transaction is suspicious. If a reasonable person would have, then if the person responsible did not do so, that person may be subject to prosecution in terms of FICA. The sentences for non-compliance is imprisonment not exceeding 15 years or a fine not exceeding ZAR10 million.
The main anti-money laundering provisions are contained in POCA, more particularly Chapter 3, Sections 4, 5 and 6. In broad terms, Section 4 criminalises the actions of any person who enters into an agreement or an arrangement whereby they assist another person to conceal or disguise or to avoid prosecution regarding property, which they know or ought to have reasonably known, is the proceeds of a crime.
In broad terms, Section 5 criminalises the actions of a person who assists another to benefit from the proceeds of his or her unlawful activity by allowing or assisting that person to retain the control of the proceeds of the unlawful activity or to assist that person to convert the unlawful proceeds into funds.
In broad terms, Section 6 criminalises the actions of any person who either acquires, possesses or uses any property in circumstances where they know or ought to reasonably have known that that property forms the proceeds of unlawful activity.
Section 8 provides that any person who is convicted of an offence contemplated in Sections 4, 5 or 6 can be fined an amount not exceeding ZA100 million or be sentenced to a period of imprisonment not exceeding 30 years.
PACCA in Part 6 of Chapter 2 also deals with the reporting responsibility for money laundering transactions. Section 20 relates to a person being an accessory to or after an offence, which would include the offence of money laundering. However, Section 20 is narrower in its application than the provisions under POCA. Section 20 only criminalises the actions of any person who has actual knowledge (as apposed to a reasonable suspicion) that the property is the proceeds of unlawful activity and enters into any dealing with regards that property or holds, receives or conceals such property. Such a person can be sentenced in a High Court to a fine or imprisonment for a period not exceeding 10 years or in a Magistrate's Court to a fine or imprisonment for a period not exceeding three years.
In addition, Section 34 of Chapter 7 of PACCA imposes a general duty to report corrupt transactions. Such a duty rests on any person who holds a position of authority and who knows or ought reasonably to have known or suspected that any other person has committed the offence of inter alia money laundering but also, common law offences of theft, fraud, extortion, forgery or uttering a forged document involving an amount of ZAR100 thousand or more.
In terms of Section 34(4) the following people hold a position of authority other than public organisations and government officials. These are:
• The head, rector or principal of a tertiary institution.
• The manager, secretary or director of a company as defined in the Companies Act of 1973 and includes a member of a Close Corporation as defined in the Close Corporations Act of 1984.
• The executive manager or any bank or other financial institution.
• Any partner in a partnership.
• Any person who has been appointed as a chief executive officer or an equivalent officer of any agency, authority, board, commission, committee, corporation, council, department, entity, financial institution, foundation, fund, institute, service or any other institution or organisation, whether established by legislation, contract or any other legal means.
• Any other person who is responsible for the overall management and control of the business of an employer.
From the above it is clear that the ambit of the definition of an authorised person is broad. On condition that the jurisdictional requirements of Section 34 are met, a person who fails to report his or her knowledge or has a reasonable suspicion that the proceeds are from unlawful activity, tested against a reasonable person in their position, could be guilty of an offence. The fine that can be imposed is the same as that which can be imposed under Section 20 as aforementioned.
The aforementioned acts, while trying to prevent commercial crime including money laundering are reactive of nature. Crime prevention authorities only react if there is a report in terms of the acts to the FIC. In an attempt to be more proactive, FICA sets certain cash thresholds, which trigger a reporting obligation irrespective of whether there is knowledge or a reasonable suspicion that the proceeds are from unlawful activities. Although FICA was enacted in February 2002, the first phase of the cash threshold reporting process will shortly be implemented. It is hoped that the purpose of cash threshold reporting will enable the FIC to timeously identify and investigate transactions that may be related to money laundering. Attorneys, casinos and motor vehicle dealers will be the first accountable and reportable institutions, and individuals who will be obliged to report physical cash payments received or made by them in an amount of ZAR25 000 or more or its equivalent foreign denomination. Cash will be coins and paper money or travellers cheques. The important issue is that there must be a physical handover of the cash. Electronic transfers, cheques, bank drafts and wire transfers are not considered a physical transfer and will not trigger the reporting obligation.
From the above it is clear that the ambit of the definition of an authorised person is broad. On condition that the jurisdictional requirements of Section 34 are met, a person who fails to report his or her knowledge or has a reasonable suspicion that the proceeds are from unlawful activity, tested against a reasonable person in their position, could be guilty of an offence. The fine that can be imposed is the same as that which can be imposed under Section 20 as aforementioned.
The aforementioned acts, while trying to prevent commercial crime including money laundering are reactive of nature. Crime prevention authorities only react if there is a report in terms of the acts to the FIC. In an attempt to be more proactive, FICA sets certain cash thresholds, which trigger a reporting obligation irrespective of whether there is knowledge or a reasonable suspicion that the proceeds are from unlawful activities. Although FICA was enacted in February 2002, the first phase of the cash threshold reporting process will shortly be implemented. It is hoped that the purpose of cash threshold reporting will enable the FIC to timeously identify and investigate transactions that may be related to money laundering. Attorneys, casinos and motor vehicle dealers will be the first accountable and reportable institutions, and individuals who will be obliged to report physical cash payments received or made by them in an amount of ZAR25 000 or more or its equivalent foreign denomination. Cash will be coins and paper money or travellers cheques. The important issue is that there must be a physical handover of the cash. Electronic transfers, cheques, bank drafts and wire transfers are not considered a physical transfer and will not trigger the reporting obligation.
