Last month, South Africa’s parliament unanimously adopted the controversial Financial Intelligence Centre Amendment Bill, also known as the amended FICA Act. This was the second time that parliament approved this bill, with the only signature outstanding being that of President Jacob Zuma.
The first time the president returned the bill to parliament was in 2016, claiming some technicalities were the reason for returning it. Now, it’s been six weeks since the bill was approved by parliament for a second time and still no word from the presidency about signing it.
The FICA bill is another example of something that can have a massive impact on the financial well-being of South Africans, yet it seems way too complicated to even bother explaining it to the nation.
To understand the Financial Intelligence Centre Amendment Bill, and to grasp the impact of not signing it, let’s break it down:
Who is the FATF?
The Financial Action Task Force (FATF) is an inter-governmental body, established in 1989 by the Ministers of its member jurisdictions. With the exception of 11 countries, that include the likes of North Korea, Syria and Iraq, the entire world forms part of the FATF.
The purpose of the FATF is to create international policies, laws and recommendations with the aim of combating money laundering, terrorist financing and other related threats to the integrity of the international financial system.
South Africa joined the Financial Action Task Force in 2003.
What is this bill?
In 2003, the Financial Intelligence Centre Act of 2001 (FICA) came into effect in South Africa. FICA regulates financial institutions, like banks and life insurance companies, to insure they comply with the guidelines set out by the Financial Action Task Force.
Similar to most laws, especially those involving highly organised crime, the regulations have to be adapted over time. The FATF has since informed South Africa that we are no longer compliant with international standards, hence the need for an amended bill.
The FATF has given South Africa until June 2017 to rectify the shortcomings in our existing legislation.
What needs to change?
There are a number of amendments in the new bill, but the one making the most headlines is the fact that financial institutions will be required to closely monitor the bank accounts of politically exposed persons, foreign and local prominent and influential persons, as well as individuals doing business with the state. Prominent figures who receive large sums of money will have to provide proof of where the funds are coming from to their bank.
The law also states that the people in the highest level of management will have to take responsibility if their institution does not oblige by the FICA regulations. This will mean that directors or senior management at banks, for example, will personally be punished if their institution does not uphold this internationally recognised set of laws.
Why the delay?
Both the security cluster and the Black Business Council (BBC) have raised concerns about the bill. The BBC said that the bill would unjustly target black people, while the security cluster feels that it would give financial institutions too many rights with regards to investigating their clients. They, and the president, have raised concerns that this might violate section 14 of the Bill of Rights, which states that everyone has the right to privacy.
On the other hand, treasury, parliament, opposition parties and the Banking Association of South Africa all support the bill and insist that the president signs it before the deadline.
Some people have cited the financial monitoring of politically exposed persons and their business partners as the main reason behind Zuma’s reluctance to sign the bill. It has even become known as the “Gupta clause”.
Either way, if we do not comply with the recommendations as set out by the Financial Action Task Force, we will be joining a very short list of countries that are sending a clear message that fighting corruption, money laundering and terrorist funding is not a priority.
How does this affect you and your money?
At Counting Coins we always reiterate that everything in the economy has an effect on something else, which in return affects something else, which ends up affecting your bank balance.
Daniël Kriel, CEO of Sanlam Private Wealth says in an article published in The Citizen that not signing the amended bill could lead to capital outflow from South Africa, as both foreign and local investors will be reluctant to invest in a country without appropriate and globally accepted anti-money laundering procedures in place.
In a recent article in the Daily Maverick, Magda Wierzycka, CEO of the Sygnia Group, has given the following examples of how not signing the bill will affect South Africans:
• You might not be able to invest money offshore if international companies refuse to accept a money transfer from your South African bank account.
• Your retirement fund savings might not be able to be invested offshore. This affects every working South African.
• If you are an importer, you might not be able to pay for goods bought offshore because your supplier’s bank will refuse to deal with a South African bank.
• If you export produce, you might not be able to be paid for the same reason.
• If you travel internationally, your credit card might not work.
• If you send money to your family overseas, as is the case for many foreign nationals working in South Africa, you might not be able to do so going forward.
• If you need medication only available overseas, you might not be able to pay for it.