This month’s Legislative Update starts on a bad note, as the Financial Action Task Force (FATF) has grey listed South Africa.
The national budget was also announced last week, which will keep most of us busy for a while as it gets unpacked. We’re glad to see that there are incentives (although small) to install solar panels and reduce consumption from Eskom.
THE FINANCIAL SECTOR CONDUCT AUTHORITY (THE FSCA)
Premium collection remuneration extension
The FSCA granted an (almost) indefinite extension to the exemptions on premium collection the day after the original exemptions expired.
As such, intermediaries have been granted another exemption until the Conduct of Financial Institutions Bill comes into force, and will continue to be remunerated for direct collection of premiums.
Let’s just say the day’s delay caused some commotion!
Continuous Professional Development (CPD)
A brief reminder of the 31 May deadline to complete your CPD. That is only three months away!
We can’t emphasise the “continuous” part enough, and encourage you to get finished well before the deadline to ensure the details are recorded in your competence register in time.
The FSCA calls for applications to serve on its new consumer advisory panel
The FSCA invited membership applications from suitable experts and representatives to serve on a new consumer advisory panel.
The purpose of the panel is to strengthen consumer representation in the financial sector regulatory environment, to assist in protecting the rights and interests of financial customers, and to instil public confidence and trust in South Africa’s financial sector.
The panel is set to engage with the FSCA on a regular basis, providing input and guidance on matters related to supervision, regulation, enforcement, research, and policy development.
Membership of the panel is not a full-time commitment. The panel is expected to meet at least four times a year, to produce a report annually on its activities, and to provide input to the FSCA as and when required.
The deadline to submit applications was 17 February 2023.
The FSCA cancels the exchange licence of ZAR X (Pty) Ltd
The FSCA and Prudential Authority announced the cancellation of the exchange licence of ZAR X (Pty) Ltd on 13 February. The licence was cancelled following prolonged non-compliance with the liquidity and capital adequacy requirements of an exchange. The licence was suspended with effect from 20 August 2021.
In our opinion, the closure of any exchange cannot be good news.
Payment of pension fund contributions document formats
The FSCA has amended Retirement Funds Notice 14 of 2022 by releasing Communication 5 of 2023.
The original and now revised Conduct Standard empowers the FSCA to determine the format in respect of certain notifications and reports. Specifically:
- Notification to and request from employer by a pension fund.
- Reporting contraventions to the FSCA.
- Reporting contraventions to the South African Police Service.
The revised format of Annexure B will enable the reporting of contraventions by funds with multiple participating employers, as well as bulk electronic submissions.
FSCA customer survey
The FSCA released a survey requesting input on the experience of transacting and engaging with the FSCA.
We submitted a response as we deal with the FSCA every day, and we hope you took the time to submit your comments. The deadline is 28 February, so there’s still a little bit of time!
Public warnings from the FSCA
The FSCA released a warning that individual(s) were impersonating the FSCA and targeting members of the public with yet another ‘unclaimed’ benefit scam via email.
We would hope that members of the public would be cautious of unsolicited mails (particularly from a Gmail address), and become concerned should the payment of a benefit to them require that they make a payment first.
The FSCA also released a warning regarding a person named Nombuso Ndlovu presenting herself as a trader for Prescient Investment Management (Pty) Ltd.
Prescient has confirmed that she is not an employee or Representative.
There were also warnings against Prudential Investment Services cc, AVA Invest Inc t/a as AVAINVESTMGOAL and Gugu Mseleku, Forex Breakout Kings / Jerome Peter Raymond Michaels, Livestock Capital Funds (Pty) Ltd, Capital Pro Trade Ltd, and Beyond Options FX as these entities aren’t even registered financial service providers (FSPs). The operators of the last two are clearly taking advantage of the public’s naivety regarding the ‘new’ over-the-counter derivatives provider category.
All too many times, greed and desperation lead to people being taken advantage of, and we commend the FSCA on regularly making such information available.
PRUDENTIAL AUTHORITY (PA)
Draft directive on regulatory treatment of accounting provisions
The PA released a draft directive to banks regarding the classification of impairments.
The intention is to replace directive 5/2017 and align the requirement with International Reporting Standard 9 (IFRS9). Once implemented, the directive will require banks to categorise provisions as specific or general according to the revised guidelines.
FINANCIAL INTELLIGENCE CENTRE (FIC)
FATF grey listing of South Africa
During the FATF plenary meeting on 24 February, the FATF decided to list South Africa as a “jurisdiction under increased monitoring” – more commonly known as “grey listing”.
Despite what you may think, it’s not all doom and gloom, as there are no items on the action plan that relate directly to the preventive measures in respect of the financial sector. This is reflective of the significant progress in the application of a risk-based approach to the supervision of banks and insurers made over the past two years. As such, the increased monitoring by the FATF will have limited impact on financial stability and costs of doing business in South Africa.
South Africa is required to implement its FATF action plan by accomplishing all of the following:
- demonstrate a sustained increase in outbound Mutual Legal Assistance requests that help facilitate money laundering (ML) / terrorism financing (TF) investigations and confiscation of different types of assets in line with its risk profile.
- improve risk-based supervision of designated non-financial businesses and professions, and demonstrate that all anti-money laundering (AML) / combating the financing of terrorism (CFT) supervisors apply effective, proportionate, and effective sanctions for non-compliance.
- ensure that competent authorities have timely access to accurate and up-to-date Beneficial Ownership (BO) information on legal persons and arrangements, and apply sanctions for breaches of violation by legal persons to BO obligations.
- demonstrate a sustained increase in law enforcement agencies’ requests for financial intelligence from the FIC for its ML/TF investigations.
- demonstrate a sustained increase in investigations and prosecutions of serious and complex ML and the full range of TF activities in line with its risk profile.
- enhance its identification, seizure, and confiscation of proceeds and instrumentalities of a wider range of predicate crimes, in line with its risk profile.
- update its TF risk assessment to inform the implementation of a comprehensive national counter financing of terrorism strategy.
- ensure the effective implementation of targeted financial sanctions, and demonstrate an effective mechanism to identify individuals and entities that meet the criteria for domestic designation.
Thankfully, there’s little to be done by Accountable Institutions other than assist the regulators where necessary.
Disrupting financial flows related to illegal wildlife trade
The South African and United States (US) governments have committed to establishing a task force aimed at advancing both countries’ efforts to combat the laundering of money generated from illegal wildlife trade.
The role players will be the Financial Crimes Enforcement Network (FinCEN) in the US, and the FIC in South Africa. More specifically, the work conducted by the FinCEN will be under the auspices of FinCEN Exchange and in South Africa, under SAMLIT (South African Anti-Money Laundering Integrated Task Force).
The task force will focus on increasing information sharing, supporting law enforcement agencies, and on strengthening AML and CFT controls.
Entities involved in farming, funding, insuring, and transporting wildlife can expect further controls and monitoring. (As can couch manufacturers – Ed.)
Read the full press release here.
The FIC appoints executive manager for monitoring and analysis
The FIC appointed Advocate Priya Biseswar as executive manager for monitoring and analysis from 1 February 2023.
Advocate Biseswar will oversee the monitoring and analysis division, which receives and analyses information and data to identify the proceeds of crime, money laundering, and the financing of terrorism. Prior to her appointment at the FIC, Advocate Biseswar served as Special Director of Public Prosecution at the Asset Forfeiture Unit within the National Prosecuting Authority.
INFORMATION REGULATOR
National Department of Health (NDoH) referred to the Enforcement Committee
Whatever happened to all that information the NDoH gathered during the COVID-19 state of disaster? In terms of the Disaster Management Act, this information was supposed to have been destroyed within six weeks of the end of the national state of disaster.
However, the NDoH has ignored the Information Regulator’s (IR) requests for confirmation that this information has been properly disposed of. This has prompted the IR to refer the matter to the Enforcement Committee.
Let’s hope the NDoH deals with the issue properly before we end up with another case of taxpayer money being wasted on another inter-department bun fight!
FINANCIAL SERVICES TRIBUNAL (FST)
The FST has had a busy start to the year, but has continued with its “no nonsense” approach as can be seen in the forthright dismissal of the following applications for debarment consideration:
LA Mbele v King Price Insurance Company Limited
It also serves as a reminder to FSPs with real cases for debarment of Representatives to follow the proper procedures.