In the ever-evolving landscape of financial crime, robust regulatory frameworks are indispensable.
According to Sybrin, the Financial Action Task Force (FATF) underscored this in February 2023, by adopting an evaluative report on South Africa’s anti-money laundering (AML) and counter-terrorist financing (CFT) strategies, which led to the country being officially greylisted.
The FATF’s framework is a call to arms for nations to bolster their defences against financial crimes. South Africa responded to its greylisting with a commitment to rectify the shortcomings in its AML/CFT protocols.
The Financial Intelligence Centre (FIC) has taken a significant step in this direction with the introduction of Directive 8—a set of rigorous guidelines aimed at tightening AML controls and improving industry compliance.
Established in 2001 under the Financial Intelligence Centre Act (FICA), the FIC stands at the forefront of South Africa’s battle against money laundering and terrorist financing. If you have ever opened a bank account or dealt with other accountable entities, you have interacted with FICA requirements.
The FIC functions as an intelligence-driven entity, collecting, analysing, and distributing financial intelligence to combat crimes that threaten the economic and national security.
Promoting a risk-based approach, the FIC collaborates with both local and international bodies to bolster AML efforts, ensuring that the financial landscape remains resilient, transparent, and free from illicit undertakings.
Issued on 31 March 2023 and effective immediately upon its publication in the Government Gazette, Directive 8 mandates a stringent screening process for both potential and current employees of financial institutions, aligned with the targeted financial sanctions lists. This directive is vital for assessing, monitoring, and managing the risks linked to money laundering, terrorist financing, and proliferation financing within the financial sector.
Directive 8 applies to all accountable institutions listed in Schedule 1, which encompasses a broad spectrum of entities within the financial sector. These organisations are required to carry out regular risk-based screenings of employees, in accordance with public compliance communication 55 (PCC55), ensuring that all personnel demonstrate the necessary competence and integrity.
Moreover, upon notification from the Director under section 26A(3) of the FIC Act, institutions must thoroughly vet the records of their employees to ascertain any potential matches in the financial sanctions notices. Institutions must maintain meticulous records of their screening processes and outcomes, which are subject to review by the FIC or any supervisory authority concerned with regulatory or supervisory functions.
The FIC’s Directive 8 underscores the critical nature of thorough employee screening in maintaining the integrity and stability of South Africa’s financial system. By adhering to this directive, financial institutions play a crucial role in fostering a compliant, transparent, and accountable sector, capable of withstanding the challenges of financial crimes.
As the financial landscape continues to evolve, Directive 8 provides a cornerstone for proactive risk management, protecting the interests of both national and global financial ecosystems.
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