What a weekend! We’re still reeling from the fantastic Rugby World Cup final. It was an amazing performance by the Springboks to take the cup.
Now that’s done, we realise that there are only six weeks left of 2023. Time to get some work done so you can take a proper break!
THE FINANCIAL SECTOR CONDUCT AUTHORITY (THE FSCA)
2023 annual levies
There has been some understandable but unnecessary consternation around the 2023 levies for financial service providers (FSPs).
We have had confirmation from the FSCA that it intends to apply the revised levies framework of the Financial Sector and Deposit Insurance Levies Act for 2023 and in future.
As such, the FSCA intends issuing levy invoices during October which will be due for payment by the end of November 2023.
The new calculation is a decidedly more complicated affair as the levy is calculated on the average number of Key Individuals and Representatives on the licence over the year from 1 September to 31 August the following year, as well as a base amount. There are also levies for the Ombud Council as well as the Financial Services Tribunal.
This year FSPs can expect the following:
Category I and IV FSPs have a base amount of R3,600 and R520 for the average number of Key Individuals and Representatives for the year. FSPs whose Representatives are only licensed for Tier 2 products will pay R250 for the average number of Key Individuals and Representatives for the year, as well as the R3,600 base amount.
Category II, IIA, and III FSPs have a base amount of R7,500, R520 for the average number of Key Individuals and Representatives over the year, as well as 0.0018595% of the total value of investments under management as at 31 August.
The Ombud Council and Financial Services Tribunal levies are each 2.5% of the general levy.
There is also a special levy of 7.5% of the general levy which will be collected in 2023 and 2024. Our understanding is that this levy will essentially only apply to banks, insurers, and exchanges as noted in Schedule 2 of the Levies Act.
We’ll gladly assist should your FSP not receive its invoice.
Crypto-asset providers licensing
Crypto-asset providers and entities planning to add the category to their licence are required to have submitted their FAIS licence applications by 30 November to be able to continue trading in the cryptocurrency and products.
The hard work should be done already, but we’re happy to assist if there is anything needed to get applications ‘over the line’.
Draft equivalence frameworks released
The FSCA released Communication 24 of 2023 which provides a draft equivalence framework for financial markets and requirements for external central counterparty and external trade repository licence applications for consultation.
The draft equivalence framework sets out the approach that the FSCA will take to determine that the regulatory framework of a foreign jurisdiction is equivalent to the regulatory framework established in terms of the Financial Markets Act, 2012 (Act No. 19 of 2012) and the Credit Rating Services Act, 2012 (Act No. 24 of 2012).
The equivalence framework seeks input in the related annexures from external trade repositories and external central counterparties and central securities depository links; external credit rating agencies; and external over-the-counter derivatives providers.
The draft determination sets out the form and manner in which an application for an external central counterparty licence or external trade repository licence must be made to the FSCA.
Comments can be submitted to FSCA.RFDStandards@fsca.co.za by 20 November 2023.
Pension funds trustee training toolkit e-learning platform
The FSCA has launched the first 11 modules of the newly revamped trustee training toolkit e-learning platform. The new toolkit is aimed at ensuring that retirement fund trustees are upskilled with more comprehensive information that will enhance their knowledge and skills to better equip them in the exercise of their fiduciary duties in the retirement funds on which they serve.
Trustees are required to complete the first 11 modules by 27 March 2024.
The toolkit is available here.
Draft exemption of long-term microinsurers
Communication 26 of 2023 from the FSCA was released on 3 October 2023.
The aim is to align the waiting period of products provided by long-term microinsurers with those of long-term insurers to ensure neither type of product provider (and hence consumers) is unfairly benefited or prejudiced. Should the amendment be passed, it will mean that waiting periods for death, disability, or health event cover will be six months.
Comments can be submitted to FSCA.RFDStandards@fsca.co.za for the attention of Johann van der Lith by 14 November 2023.
Information request on open finance activities
The FSCA issued an information request to financial institutions involved in open finance-related activities.
Open finance involves financial institutions sharing their customers’ financial information with third parties. Only entities involved in open finance need to complete the returns by 10 November 2023, but are potentially liable for a fine should they not complete the request.
The results will be used to guide the position paper on open finance.
FSCA criminal record verification exercise
The FSCA informed the financial services industry of its intent to conduct a criminal record verification exercise via Communication 27 of 2023 on 17 October.
The verification will apply to significant owners, Key Individuals, directors, shareholders, members, and trustees of FSPs and collective investment scheme managers.
Sole traders and partnerships are excluded, as are individuals at banks, insurers, and over-the-counter derivative providers. FSPs only licensed for non-life insurance and/or health services benefits are excluded from the exercise as the verification is either done elsewhere or will be done as a separate exercise.
It is fairly obvious, but the communication confirms that this is part of the effort to meet the outstanding requirements of the Financial Action Task Force (FATF) that lead to South Africa’s grey listing.
The verifications will be handled through Managed Integrity Evaluation (Pty) Ltd (MIE), and affected individuals will be contacted directly to set up appointments. Individuals will need to visit MIE sites with proof of their identity.
The verification process will be implemented as part of an ongoing exercise, and is already running as part of the FSCA’s review of individuals newly appointed to these positions.
It is expected that the exercise will commence on 1 November 2023.
Warning against INN8 Invest impersonators
The FSCA has issued a warning to the public regarding a WhatsApp account that is impersonating INN8 Invest. INN8 is a registered trademark of Stanlib Wealth Management (Pty) Ltd.
The WhatsApp account is promising to double clients’ money within 24 hours (“If it sounds too good to be true…” Ed.).
Other than confirming that it has no affiliation with the people involved, Stanlib confirmed that it would not use WhatsApp as a platform to render intermediary services.
Integrated annual report
The FSCA released its integrated annual report during October.
Frankly, there was not much to be gained from reading the document as it gives no update on planned changes to the regulatory framework, but if you’d like to see what the executives earn or what qualifications they hold, go have a look.
FINANCIAL INTELLIGENCE CENTRE (FIC)
Annual report
The FIC released its 2022/2023 annual report at the end of September.
The FIC notes that it has recovered more than R5.8 billion in criminal proceeds during the year. This was accompanied by 3,424 intelligence reports relating to money laundering, fraud, bribery, and corruption.
Of the more than 5.3 million reports submitted to the FIC, approximately 10.5% were suspicious and unusual transaction reports. The FIC conducted inspections of 402 entities of which 302 were of legal practitioners. Other sectors include motor vehicle dealers, trust companies, and the gambling industry. This reflects the amendments to the schedules of entities denoted as Accountable Institutions.
The FIC and its partner institutions have a long road to walk if they hope to rectify the FATF’s grey listing of South Africa. From the information in the report, it is evident that these efforts are underway.
Draft amendments to anti-money laundering and terrorist financial control legislation
In its role as the coordinating body, National Treasury released draft amendments to the Financial Intelligence Centre Act (FICA).
The amendments aim to align FICA with the Protection of Personal Information Act (POPIA), particularly when Accountable Institutions share information with each other.
Provided that Accountable Institutions have implemented suitable POPIA protocols, this should not pose a problem.
Non- and incomplete submission of returns
The FIC issued a notice to Accountable Institutions that have not submitted their risk and compliance returns in terms of Directive 6. The affected institutions are legal practitioners, trust and company service providers, estate agents, and gambling institutions.
Accountable institutions that fail to comply may face a criminal penalty. Affected entities may be able to avoid penalties by submitting returns via the goAML system.
In another notice, the FIC noted that the affected entities in Directive 6 and Directive 7 (credit providers, South African Post Bank, high value goods dealers, the South African Mint, and crypto-asset providers) are to ensure that they are properly registered on the goAML system and that the information submitted is correct and complete.
Guidance on the interpretation of legal practitioners
The FIC released Public Compliance Communication 47A (PCC47A) on 17 October.
As the title implies, PCC47A provides guidance on the interpretation of the definition of legal practitioners as listed in Schedule 1 of the FIC Act.
The PCC provides guidance on the practical interpretation and application of the definition of legal practitioners and an overview of anti-money laundering, counter terrorist financing, and counter proliferation financing vulnerabilities legal practitioners face.
Schedule 1 defines a legal practitioner as “(a) A person who is admitted and enrolled to practise as a legal practitioner as contemplated in section 24(1) of the Legal Practice Act, 2014 (Act 28 of 2014) and who is– (i) an attorney (including a conveyancer or notary) practising for his or her own account as contemplated in section 34(5)(a) of that Act; or (ii) an advocate contemplated in section 34(2)(a)(ii) of that Act. (b) A commercial juristic entity, as contemplated in section 34(7) of the Legal Practice Act, 2014”.
The PCC goes on to break down the definition as it relates to the practical operations of legal practitioners to confirm who falls into this group of Accountable Institutions, and reminds them to register on the goAML system.
The examples provided in the PCC are similar to those of other FSPs, but are focused on the functions of legal practitioners and serve as a helpful guide when developing a Risk Management and Compliance Plan.
COMPANIES AND INTELLECTUAL PROPERTY COMMISION (CIPC)
Beneficial owner returns
It took a while, but we have confirmation that the beneficial owner returns to the CIPC are to be completed.
The amendments to the Companies Act – brought on by the General Laws (Anti-Money Laundering and Combating Terrorism Financing) Act and the Companies Regulations – have brought about the requirement.
Entities that are newly incorporated must submit their beneficial owner information within 10 days of being registered. Other entities must do so with their annual returns every year.
As much as it may be unnecessary, we would recommend all entities complete the return to avoid any penalties.
COUNCIL FOR MEDICAL SCHEMES (CMS)
Induction programme for trustees of closed schemes
The CMS is hosting a two-day induction programme for Board of Trustees of closed medical schemes on their virtual classroom from 1 to 2 November 2023.
These sessions aim to provide guidance to newly appointed members of the Board of Trustees on the following topics:
- Introduction to the Medical Schemes Act.
- Compliance with the Medical Schemes Act.
- Accreditation of brokers and healthcare providers.
- Overview of prescribed minimum benefits.
- Complaints and adjudication procedures.
- Financial soundness of medical schemes.
There are plans to add the following topics:
- Training for open medical schemes.
- Training for closed schemes.
- Training for specific schemes.
Annual report
The CMS released its annual report for 2022/2023. While the link was working and we were able to read it, the only salient thing we noticed was the glaring omission of any mention of the plans around National Health Insurance.
A-PROOFED
Once upon a time in the land of Complianceville, there lived a young scribe named Kim. She had a special talent that set her apart from the rest of the villagers: she could spot even the tiniest of errors in the written word. Her eyes were as sharp as the finest quills, and her heart was as pure as the parchment on which she wrote.
In Complianceville, the people cherished the written word, for it held the power to convey knowledge and wisdom. However, there was a problem that plagued the village – their texts were riddled with mistakes, for they lacked someone with Kim’s gift. The villagers struggled to understand the true meanings of their words, and confusion reigned.
One sunny morning, the village elder, a wise old librarian named Master Bryan, approached Kim with a plea for help. He had a cherished manuscript filled with knowledge about the village’s history, but it was marred by errors and inconsistencies. He believed that only Kim’s gift could save the manuscript.
Kim accepted the challenge with a determined heart. She took the manuscript, spread it on a table in the village square, and began her work. With painstaking care, she combed through the text, correcting spelling errors, fixing grammar, and reordering sentences for clarity. As she worked, the words on the pages seemed to come to life, dancing with newfound harmony.
Word of Kim’s incredible gift and her noble quest spread throughout Complianceville. Villagers gathered around her, bringing their own works for her to proofread. She turned every piece of writing into a masterpiece, and as she did, the people’s lives improved. No longer did they misunderstand each other, and their knowledge grew with each corrected text.
As her work continued, the village elder’s manuscript transformed into a beautifully polished tome. With tears in his eyes, Master Bryan thanked Kim for saving the village’s history and knowledge.
From that day on, Complianceville became known for its precise and well-crafted texts, and they lived happily ever after, all thanks to Kim’s remarkable proofreading talent and the power of clarity and precision in the written word.
I can do the same for you! Get in touch.
kim@a-proofed.co.za | 083 657 3377