FIC Strategic Overview Presentation to the Standing Committee on Finance

1. FIC Strategic Overview Presentation to the Standing Committee on Finance Murray Michell – FIC Director 29 July 2014

2. Contents • FIC’s legislative mandate and focus areas • Operating model • FIC Act architecture • FIC Programmes: a) compliance and prevention programme b) monitoring and analysis programme c) legal and policy programme d) corporate services and funding 5. Risks

3. Financial Intelligence Centre:Vision and Mission Vision • The FIC strives for a safer future for all South Africans in which the financial system has integrity and transparency to support economic growth and social development. Mission • The FIC promotes increasing levels of compliance with the FIC Act in an efficient and cost-effective manner, enabling it to provide high-quality, timeous financial intelligence for use in the fight against crime and the protection of national security.

4. FIC’s legislative mandate

5. FIC’s legislative mandate • The FIC’s mandate, in summary, is twofold: • To produce information that makes the criminal justice system more effective and enhances the protection of the people of South Africa • To ensure effective compliance with the FIC Act so that the information available to law enforcement and security agencies is of high quality • The FIC contributes to making the South African financial system a hostile environment to illicit activity such as the hiding of proceeds of crime or funding terrorism i.e. to maintaining the integrity of the system. • The FIC promotes increasing levels of compliance with the FIC Act enabling it to provide high-quality, timeous financial intelligence for use in the fight against crime and the protection of national security.

6. FIC focus areas and strategic outcomes • Overall, the FIC contributes to the achievement of specific national priorities and outcomes as articulated through the NDP and the MTSF • Government Outcome 3: all people in South Africa are and feel safe; • Government Outcome 11: create a better South Africa, a better Africa and a better world; • By so doing, FIC contributes indirectly to Outcome 4: encouraging employment through inclusive growth.

7. FIC focus areas and strategic outcomes • The FIC has defined four Strategic Outcomes as primary focus areas in the way it executes its mandate • These align the entity’s operations to external and internal factors emanating from the legislative mandate, the NDP and the MTSF: FIC Strategic Outcome 1: • Improving the collection of information and the enforcement of compliance with the FIC Act FIC Strategic Outcome 2: • Better utilisation of financial intelligence FIC Strategic Outcome 3: • Promoting national interest in maintaining the integrity of SA’s financial system FIC Strategic Outcome 4: • Ensuring a safe, secure, compliant and efficient operating environment

8. 2. FIC’s operating model FIC primary focus: contribution and support to Government Outcomes 3, 4 and 11 1. Planning Coordinated by Office of the Director – FIC Through document analysis, engagement with stakeholders FIC Planning alignment to support delivery partners Support delivery partners to achieve Government Outcome 3: All people in South Africa are and feel safe Support to Government Outcome 11: Creating a better South Africa and contribution to a better and safer Africa in a better world 2. Collection of data FIC Compliance and Prevention programme; Supervision and enforcement of the FIC Act; Expansion of data sources based on guidance and application of the FIC Act Compliance and Prevention alignment with delivery partners 3. Analysis FIC Monitoring and Analysis programme; for the production of financial intelligence, analysis based on financial and other data Analysis and Finint alignment to support delivery partners Contributes to protecting the financial system, in support of Government Outcome 4: Decent employment through inclusive economic growth 4. Dissemination of Financial intelligence FIC Monitoring and Analysis programme Safely and securely enable exchange of information Dissemination of Finint alignment to support delivery partners National Development Plan To combat crime and corruption through: Prevention; Deterrence; SCM • Operational focus • National crime priorities • National security priorities Legal and Policy alignment to support delivery partners 5. Re-appreciation process FIC Legal and Policy programme; To produce policy and law by assessing multiple domestic and international factors National Crime Priorities Corporate Services support to align FIC to meet delivery partners requirements 6. Operational Support FIC Corporate Services programme National Security Priorities

9. FIC’s operating model: Integration- crime combating and security

10. 3. FIC Act:Architecture Other FIUs MoF Bank 3 CTRs SARS FIC SAPS STRs Bank 2 Data receipt Processing Analysis Referral Bank 1 S DPCI TPRs EFTs SSA

11. Architecture: Compliance requirements • Currently various categories of business – eg. banks, insurance industry, brokers, casinos, lawyers, estate agents • Required to report to the Centre (Suspicious Transactions Reports; (STRs); terror financing (TPRs); cross border movement of funds reports (EFTs); large cash transactions - receipts and withdrawals (CTRs). • Required to: Keep records for 5 years; Identify and verify clients; appoint compliance officer; provide training for staff. • Required to register with FIC

12. Architecture: Supervisory bodies • Listed in Schedule 2 of the Act • These are: the Financial Services Board (FSB); SA Reserve Bank (BSD and FinSurv); Estate Agency Affairs Board (EAAB), Independent Regulatory Board for Auditors (IRBA); National Gambling Board; Provincial (Gambling) Licensing Boards; the four Provincial Law Societies. • Obliged to monitor the level of compliance by accountable institutions • FIC supervisors where there is no supervisor (motor vehicle dealers) • Supervisors required to monitor and enforce compliance standards

13. 4 a) Compliance and Prevention programme: Objectives The FIC compliance programme is responsible for compliance and supervisory relationship management. FIC is responsible for inspection of institutions without a supervisory body (vehicle dealers, krugerrands dealers) Uses the following methods: • Guides and advises supervisory bodies on their FIC Act supervision and enforcement obligations • Issues guidance products interpreting FIC Act obligations • Raises levels of registration • Raises level of reporting • Maintains the FIC registration database • Conducts inspections to test and encourage compliance • Enforcement remedial actions for non-compliance

14. Compliance programme:Achievements and focus areas • The FIC has signed MOUs with 19 supervisory bodies detailing the approach in supervising compliance with FIC Act obligations • FIC conducted compliance awareness road shows in major centres around the country over the last two years • The number of accountable and reporting institutions registered with the FIC increased by 20% over the previous financial year • Enforcement Forum

15. Compliance programme: Achievements • Public queries answered PQP and contact centre : 15 871 • FIC own inspections conducted : 159 • Institutions that registered with the FIC : 4 453 • Compliance awareness sessions : 45 • Media articles published : 16 • Guidance products issued : 11

16. 4 b) Architecture: Law enforcement authorities • Investigate and prosecute cases involving proceeds of crime • Receive referrals from the FIC • Makes requests to the FIC for additional information • Appoint Authorised Officers • To protect integrity of information • Provide access to government databases to verify info • Ability to search criminal databases • Provide feedback on progress made in investigations and prosecutions • Collect and report statistics

17. FIC and law enforement: Key Strategic Stakeholders

18. Monitoring and Analysis programme:Production of financial intelligence products, & support for investigative work

19. 4 c) Legal and policy programme: Objectives • Administers the FIC Act • Provides advice on strategic policy and legislative nature on AML/ CFT, eg legislative framework • Leads RSA participation in Financial Action Task Force (FATF) the international inter-governmental bodies which sets international standards on money laundering and terror financing and to Eastern and Southern Africa anti-Money Laundering Group (ESAAMLG) • Supports RSA role in AML/ CFT in other bodies, such as UN, G20 and OECD

20. Legal and policy programme – Integrity of SA financial system • Aim to ensure SA’s legal framework against money laundering and terror financing continues to meet international standards and best practice • Developing draft legislation in partnership with National Treasury to amend FIC Act: • Introduce more transparency in financial system • Requirement to identify beneficial owners (natural persons behind corporate veil) of companies, trusts, partnerships etc. • Requirement to pay more attention to business relationships involving politically exposed persons • Introduce more flexibility for financial institutions • Allow institutions to adjust due diligence measures based on their assessment of risk that products or services may be abused • Improve the FIC’s analysis capacity to analyseinformation • Enhance its access to information and broadening range of institutions within the scope of the FIC Act

21. Legal and policy programme – FATF • FATF sets international standards for systems to combat money laundering, and terror financing (CFT) and financing of the proliferation of weapons of mass destruction (WMD) (as set out in 40 Recommendations) • More than 190 countries around the world subscribe to these standards • Compliance with these standards is measured through peer review within FATF and seven regional bodies and assessments by IMF and World Bank • Assessments by IMF and World Bank are used as one of the indicators of a country’s financial sector stability • SA has been a member since 2003

22. Legal and policy programme – ESAAMLG • ESAAMLG is a regional body for Southern and Eastern Africa styled after the FATF • ESAAMLG co-ordinates policy formulation relating to combating of money laundering and terror financing and promotes implementation of FATF’s international standards at regional level • ESAAMLG conducts its own peer review process to ensure commitment within the region to combating money laundering and terror financing • SA has been a member since 2002

23. 6. Risks: Major Risks • Funding: • Unavoidable costs 89% of funding allocation • Inability to recruit/ develop high level skills • Replacement of ICT equipment and applications • Enhancement of ICT capability • Security • Cyber crime and attacks

24. Thank you