THE NEW FICA AMENDMENTS
The new amendments of FICA changes the compliance framework for accountable institutions to a great extent and we'll discuss some of the more pertinent items in this blog post.
Risk Based Compliance
According to the new requirements of FICA, accountable institutions now need to take a risk based approach to FICA and the implementation thereof. This includes:
The nature, scale and complexity of the accountable institution’s business;
The diversity of its operations, including geographical diversity;
Its client, product or services profile;
Its distribution channels;
The volume and size of its transactions; and
The degree of risk associated with each area of its operation.
One must also now be able to risk rate clients according to the risk that they pose with regards to being used for money laundering or to channel the proceeds of any crime. Certain customers and businesses are a lower risk than others and some are a higher risk. Some of the aspects that one can look at to determine the risk a client poses are:
Does the client operate in a sector or industry that is subject to specific standards, market entry or market conduct requirements, other regulatory requirements (especially AML/CFT measures)?
Has the client been in a business relationship with the institution for a period of time?
What has been the patterns of transaction behaviour (e.g. speed, frequency, size, volume, etc.) of a client who has a history of a business relationship with an institution?
Has the institution previously observed suspicious or unusual activities or transactions on the part of the client?
If the client is a corporate vehicle, is it part of a complex or multi layered structure of ownership or control?
What information does the client provide concerning their source(s) of income?
What is the nature of the client’s business activity, e.g. does the activity involve transacting in large amounts of cash, cross-border movements of funds, trading in sensitive, controlled or sanctioned commodities, etc?
What is the nature of the type of the products and services offered by the client?
Does the client operate solely within the country or do they have cross-border operations?
Is the client’s product selection rational with a view to support their business or personal needs?
Does the client occupy a prominent public position or perform a public function at a senior level or does it have such individuals within its ownership and control structure?
Is there adverse information about the client available from public or commercial sources?
Is the client known to be subject to financial sanctions?
Enchanced Due Diligence
When and if you see that a customer is a medium to higher risk we always advise in taking extra measures with software such as:
PEP (Politically Exposed Person) checks
Sanctions checks
Adverse news checks (i.e. that shows allegations or actual proven criminal activity)
Understanding the sources of funds better and the transaction aims
Asking any other questions that would comply with your risk based approach and set you mind at ease or that would prover your concerns with the client
Contact us for assistance
We can assist you with any policy drafting requirements, risk measurements, training and software checks for PEPs, Sanctions and Adverse news screening. Contact us today for assistance to ensure your business is safe!
