Key FICA Definitions

Key FICA Definitions

FIC AND/OR LEGISLATION ASCRIBES THE FOLLOWING MEANING TO THESE DEFINITIONS:

• Accountable Institution is defined as a person or organisation referred to in Schedule 1 of the FIC Act that carries out business of any entity listed. Accountable Institutions Include the Following Organisations: A practitioner who practices as defined in section 1 of the Attorneys Act (53 of 1979).

• Beneficial ownership

1. means a natural person who directly or indirectly—

1. ultimately owns or exercises effective control of—

(aa)   a client of an accountable institution; or

(bb)   a legal person, partnership or trust that owns or exercises effective control of, as the case may be, a client of an accountable institution; or

2. exercises control of a client of an accountable institution on whose behalf a transaction is being conducted; and

2. includes:

1. in respect of legal persons, each natural person contemplated in section 21B(2)(a);
2. in respect of a partnership, each natural person contemplated in section 21B(3)(fe); and
3. in respect of a trust, each natural person contemplated in section 21B(4)(c), (d) and (e).

• Business Relationship is defined in the FIC Act as an arrangement between a client and an accountable institution for the purpose of concluding transactions on a regular basis. A business relationship therefore entails an element of a time duration to the engagement with the client.

• CDD / Customer Due Diligence is a process to be used by Accountable Institutions as one of the measures to mitigate the Money Laundering / Terrorist Financing risk associated with a proposed business relationship or single transaction. The customer due diligence process provides an accountable institution with the information required to know who they are doing business with, to know who benefits from the business it does with its clients, to understand the nature of the business it does with its clients and to determine when the business with clients should be considered suspicious or unusual. This is one of the mechanisms at accountable institutions’ disposal to mitigate the risk of exploitation for money laundering or terrorist financing purposes.

• Client means a person who has entered into a business relationship or a single transaction with an accountable institution.

• Controlled Goods & Activities

Controlled goods are primarily goods, including components and technical data that have military or national security significance, which are controlled domestically by the Government of Canada and defined in the Defence Production Act.

In summary, controlled goods are:

• goods, including components and technology (for example, blueprints and technical specifications in paper or electronic format), with strategic significance or national security implications, regardless of where they are manufactured
• defense articles originating from the United States that are controlled by the United States Munitions List—part 121 of the United States International Traffic in Arms Regulations, as amended from time to time
• goods, regardless of where they are manufactured, that are manufactured from technical data originating from the United States and are controlled by the International Traffic in Arms Regulations, as amended from time to time

• Domestic Politically Exposed Person (DPEP) in terms of Schedule 3A, an individual who holds, including in an acting position for a period exceeding six months, or has held a prominent public function in the Republic, including that of:

President or Deputy President of South Africa

Government minister or deputy minister

Premier of a province

Member of the Executive Council of a province

Executive mayor of a municipality

Elected in terms of the Local Government: Municipal Structures Act

Leader of a political party registered in terms of the Electoral Commission Act, 1996

Member of a royal family or senior traditional leader as defined in the Traditional Leadership and Governance Framework Act, 2003

Head, accounting officer or chief financial officer of a national or provincial department or government component, as defined in section 1 of the Public Service Act, 1994

The municipal manager of a municipality or chief financial officer

Chairperson of the controlling body, the chief executive officer, or a natural person who is the accounting authority, the chief financial officer or the chief investment officer of a public entity listed in Schedule 2 or 3 to the Public Finance Management Act.

the chairperson of the controlling body, chief executive officer, chief financial officer or chief investment officer of a municipal entity as defined in section 1 of the Local Government: Municipal Systems Act, 2000

a constitutional court judge or any other judge as defined in section 1 of the Judges’ Remuneration and Conditions of Employment Act, 2001

an ambassador or high commissioner or other senior representative of a foreign government based in the Republic

an officer of the South African National Defence Force above the rank of major- general

the position of head, or other executive directly accountable to that head, of an international organisation.

• Domicilium address - Domicilium citandi et executandi is a Latin legal term meaning the address nominated by a party in a legal contract where legal notices may be sent.  The delivery of a legal notice to the address of the domicilium citandi et executandi of a party to a contract can be considered legally sufficient for that notice to be considered received by that party, without the need for the person giving notice actually to find the person.  One or both parties to a contract may demand the other nominate a domicilium citandi et executandi, typically in order to expedite later legal procedures relating to a contract by making it impossible for a party to claim that a legal notice was not received. 

• Dual Used Goods are goods, software and technology that can be used for both civilian and military applications which contribute to the proliferation of weapons of mass destruction. These types of goods are heavily regulated because they can be classified for civilian use and then transformed for military purposes, or worse, used for terrorism. Examples include electronics, computers, chemicals, drones, aluminium pipes and navigation devices.

• FATF / Financial Action Task Force is the global money laundering and terrorist financing watchdog. The inter-governmental body sets international standards that aim to prevent these illegal activities and the harm they cause to society. As a policy-making body, the FATF works to generate the necessary political will to bring about national legislative and regulatory reforms in these areas. The 39-member body sets international standards to ensure national authorities can effectively go after illicit funds linked to drugs trafficking, the illicit arms trade, cyber fraud and other serious crimes. In total, more than 200 countries and jurisdictions have committed to implement the FATF’s Standards as part of a co-ordinated global response to preventing organised crime, corruption and terrorism. The FATF was established in 1989 and is based in Paris.

• FIC The Financial Intelligence Centre is an organ of state established in terms of Section 2 of the Financial Intelligence Centre Act 38 No.38 of 2001 (the FIC Act).  It is an institution that functions outside the public service but within the public administration.  The primary purpose of the Centre is to assist in the identification of the proceeds of unlawful activities and to combat money laundering activities as well as the financing of terrorism and related activities

• FICA the Financial Intelligence Centre Act 38 No.38 of 2001 (the FIC Act). 

• Foreign Politically Exposed Person (FPEP):

A person as listed under Schedule 3B of the FIC Act who is an individual who holds, or has held, in any foreign country a prominent public function including that of a:

1. Head of State or head of a country or government;
2. member of a foreign royal family;
3. government minister or equivalent senior politician or leader of a political party;
4. senior judicial official;
5. senior executive of a state-owned corporation; or
6. high-ranking member of the military.

• Money laundering is the process that criminals use to launder their funds so that the proceeds they have acquired from illicit (illegal) activities appear to be legitimate.

• Money laundering activity means an activity which has or is likely to have the effect of concealing or disguising the nature, source, location, disposition or movement of the proceeds of unlawful activities or any interest which anyone has in such proceeds, and includes any activity which constitutes an offence in terms of section 64 of this Act or section 4, 5 or 6 of the Prevention of Organised Crime Act, contains the following definitions: 

‘Money laundering’ - any person who knows or ought reasonably to have known that property is or forms part of the proceeds of unlawful activities and- (a) enters into any agreement or engages in any arrangement or transaction with anyone in connection with that property, whether such agreement, arrangement or transaction is legally enforceable or not; or (b) performs any other act in connection with such property, whether it is performed independently or in concert with any other person, which has or is likely to have the effect-

(i) of concealing or disguising the nature, source, location, disposition or movement of the said property or its ownership or any interest which anyone may have in respect thereof; or

(ii) of enabling or assisting any person who has committed or commits an offence, whether in the Republic or elsewhere- (aa) to avoid prosecution; or (bb) to remove or diminish any property acquired directly, or indirectly, as a result of the commission of an offence, shall be guilty of an offence. 

‘Assisting another to benefit from proceeds of unlawful activities’ – means any person who knows or ought reasonably to have known that another person has obtained the proceeds of unlawful activities, and who enters into any agreement with anyone or engages in any arrangement or transaction whereby-

(a) the retention or the control by or on behalf of the said other person of the proceeds of unlawful activities is facilitated; or

(b) the said proceeds of unlawful activities are used to make funds available to the said other person or to acquire property on his or her behalf or to benefit him or her in any other way, shall be guilty of an offence. 

• Primary Source of Funds means the origin of the funds involved in a business relationship or single transaction. It includes both the activity that generated the funds used in the business relationship (for example the client’s salary, occupation, business activities, proceeds of sale, corporate dividends, etc.), as well as the means through which the client’s funds were transferred.

• Prominent Influential Person (PIP):

A prominent influential person is an individual who holds, or has held at any time in the preceding 12 months, the position of:

1. chairperson of the board of directors;
2. chairperson of the audit committee;
3. executive officer; or
4. chief financial officer,

of a company, as defined in the Companies Act, 2008 (Act No. 71 of 2008), if the company provides goods or services to an organ of state and the annual transactional value of the goods or services or both exceeds an amount determined by the Minister by notice in the Gazette.

• Proliferation financing is where individuals, entities, countries or governments raise funds in order to assist with their purchasing of weapons of mass destruction.

• Proliferation of financing activities means an activity which has or is likely to have the effect of providing property, financial or other service or economic support to a non-State actor, that may be used to finance the:

• manufacture,
• acquisition,
• possessing,
• development,
• transport,
• transfer or
• use of

nuclear, chemical or biological weapons and their means of delivery, and includes any activity which constitutes an offence in terms of section 49A of FICA.

• Single transaction refers to a transaction (a) other than a transaction concluded in the course of a business relationship; and (b) where the value of the transaction is not less than the amount prescribed, except in the case of section 20A (anonymous client).

• Source of wealth means the activities that have generated the total net worth of the client that is, the activities that produced the client’s funds and property (for example inheritance or savings).

• Terrorist activity is defined in terms of the Protection of Constitutional Democracy Against Terrorist and Related Activities Act (POCDATARA) as: 

‘terrorist activity’, with reference to this section and sections 2, 3 and 17(2), means any act committed in or outside the Republic, which:

1. 1. 1. involves the systematic, repeated or arbitrary use of violence by any means or method;
      2. involves the systematic, repeated or arbitrary release into the environment or any part of it or distributing or exposing the public or any part of it to:

(aa) any dangerous, hazardous, radioactive or harmful substance or organism;

(bb) any toxic chemical;

(cc) any microbial or other biological agent or toxin; or

(dd) any weapon of mass destruction in terms section 1 of the Non-Proliferation of Weapons of Mass Destruction Act, including those with dual-purpose capabilities as defined in section 1 of the Non-Proliferation of Weapons of Mass Destruction Act, or any substance, mixture of substances, product or material contemplated in section 2(1) of the Hazardous Substances Act;

1. endangers the life of, or violates the physical integrity or physical freedom of, or causes serious bodily injury to or the death of, any person, or any number of persons; (iiiA) is calculated to overthrow the government of the Republic or any other government;
2. causes serious risk to the health or safety of the public or any segment of the public;
3. (v) causes the destruction of or substantial damage to any property, natural resource, or the environmental or cultural heritage, whether public or private; (vA) causes the destruction of or substantial damage or interference to an information infrastructure or any part thereof;
4. is designed or calculated to cause serious interference with or serious disruption of an essential service, facility or system, or the delivery of any such service, facility or system, whether public or private, including, but not limited to:

(aa) a system used for, or by, an electronic system, including an information system;

(bb) a telecommunication service or system;

(cc)   a banking or financial service or financial system;

(dd)  a system used for the delivery of essential government services;

(ee) a system used for, or by, an essential public utility or transport provider;

(ff)     an essential or critical infrastructure, information infrastructure, or a critical infrastructure complex; or (gg) any essential service designated as such in terms of the Labour Relations Act, 1995 (Act No. 66 of 1995), or essential emergency services, such as police, medical or civil defence services;

5. causes any major economic loss or extensive destabilisation of an economic system or substantial devastation of the national economy of a country;
6. creates a serious public emergency situation or a general insurrection in the Republic; or
7. is the offence of:

(aa) unlawful access in terms of section 2 of the Cybercrimes Act;

(bb)  unlawful interception of data in terms of section 3 of the Cybercrimes Act;

(cc)   unlawful interference with data or a computer program in terms of section 5 of the Cybercrimes Act;

(dd) unlawful interference with a computer data storage medium or a computer system in terms of section 6 of the Cybercrimes Act;

(ee) unlawful acquisition, possession, provision, receipt or use of a password, access code or similar data or device in terms of section 7 of the Cybercrimes Act;

(ff)     unlawful use or possession of a software or hardware tool for purposes of committing the offences listed in items (aa) to (ee); or

(gg) cyber extortion in terms of section 10 of the Cybercrimes Act,

which is committed with the intention to facilitate or to commit an act referred to in subparagraphs (i) to (viii) of this paragraph, whether the harm contemplated in subparagraphs(i) to (vii) is or may be suffered in or outside the Republic, and whether the activity referred to in subparagraphs (ii) to (ix) was committed by way of any means or method; and (b) which is intended, or by its nature and context, can reasonably be regarded as being intended, in whole or in part, directly or indirectly, to—

1. 1. 1. threaten the unity and territorial integrity of the Republic;
      2. intimidate, or to induce or cause feelings of insecurity within the public, or a segment of the public, with regard to its security, including its economic security, or to induce, cause or spread feelings of terror, fear or panic in a civilian population;
      3. unduly compel, intimidate, force, coerce, induce or cause a person, a government, the general public or a segment of the public, or a domestic or an international organisation or body or intergovernmental organisation or body, to do or to abstain or refrain from doing any act, or to adopt or abandon a particular standpoint, or to act in accordance with certain principles; or
      4. further the objectives of an entity engaged in terrorist activity, whether the public or the person, government, body, or organisation or institution referred to in subparagraphs (ii) or (iii), as the case may be, is inside or outside the Republic;

• Terrorist financing is the process of funding terrorists, terrorist acts or terrorist organisations.

• TFS / Targeted Financial Sanctions are sanctions imposing restrictions on activities that relate to particular countries, goods and services, or persons and entities.  Targeted Financial Sanctions (TFS) measures generally restrict sanctioned persons and entities from having access to funds and property under their control and from receiving financial services in relation to such funds and property.  In order for these sanctions to be given effect, the FIC Act requires Accountable Institutions to freeze property and transactions pursuant to financial sanctions imposed in the United Nations Security Council Resolutions.

• Ultimate Beneficial Owner (UBO):

Means a natural person who directly or indirectly—

3. ultimately owns or exercises effective control of—

(aa)        a client of an accountable institution; or

(bb)       a legal person, partnership or trust that owns or exercises effective control of, as the case may be, a client of an accountable institution; or

4. exercises control of a client of an accountable institution on whose behalf a transaction is being conducted; and

Includes:

4. in respect of legal persons, each natural person contemplated in section 21B(2)(a);
5. in respect of a partnership, each natural person contemplated in section 21B(3)(fe); and
6. in respect of a trust, each natural person contemplated in section 21B(4)(c), (d) and (e).

• Unlawful activity is conduct which constitutes a crime or which contravenes any law, whether such conduct occurred before or after the commencement of this Act and whether such conduct occurred in the Republic or elsewhere.

• UNSC / United Nations Security Council is one of the six main organs of the United Nations established under the UN Charter. Its primary responsibility is maintaining international peace and security. The Council has 15 Members (5 permanent and 10 non-permanent members). Each Member has one vote. Under the Charter, all Member States are obligated to comply with Council decisions.  The Security Council takes the lead in determining the existence of a threat to the peace or act of aggression. It calls upon the parties to a dispute to settle it by peaceful means and recommends methods of adjustment or terms of settlement. In some cases, the Security Council can resort to imposing sanctions or even authorize the use of force to maintain or restore international peace and security.  The Security Council has a Presidency, which rotates, and changes, every month.