UPHOLDING INTEGRITY: THE CRITICAL TRIO OF SANCTION SCREENING, ULTIMATE BENEFICIAL OWNER CHECKS, AND ENHANCED DUE DILIGENE IN SOUTH AFRICA
In South Africa's business landscape, where regulatory compliance and ethical conduct are paramount, the trio of sanction screening, ultimate beneficial owner (UBO) checks, and enhanced due diligence (EDD) holds immense significance. These practices not only safeguard businesses against financial crimes but also uphold transparency, integrity, and trust. Let us have a look at the possible consequences of non-compliance and a few examples of entities who are learning the hard way.
General Consequences of neglecting Sanction Screening, UBO checks, and Enhanced Due Diligence (where applicable) include:
Financial Penalties: Regulatory authorities may impose sanctions, fines, or restrictions on businesses that fail to conduct sanction checks, establishing the UBO and conducting adequate EDD (where applicable), compromising their regulatory good standing.
Reputational Damage: Failure to comply with these rules and regulations can tarnish a company's reputation and undermine trust among clients, partners, and stakeholders.
Legal Ramifications: Non-compliance may result in criminal charges, legal proceedings, and potential imprisonment for individuals involved.
Regulatory Scrutiny: Failure to comply may attract regulatory scrutiny and investigations into the business's operations.
Exposure to Financial Crimes: Inadequate due diligence increases the risk of involvement in financial crimes such as money laundering, corruption, and terrorism financing.
Examples of entities learning the hard way when it comes to FICA:
A large fund manager received a fine of nearly R20 million by failing to identify and verify the identity of some clients, including beneficial owners of clients.
An advisory firm was fined nearly R500,000 for not having a proper RMCP in place.
A large Bank was fined over R20 million for not properly identifying clients and conducting client screenings.
Legal firms and Real-Estate Agencies are especially under fire with fines and sanctions coming their way at the moment as some of these types of entities still fail to comply with all the rules and regulations of the FIC Act.
Therefor it is crucial to conduct proper due diligence on all your clients. Make sure to complete the required screenings of your clients, establish the ultimate beneficial owner without any doubt, and go that extra mile and conduct the Enhanced Due Diligence should the type of client warrant that. Non-compliance will be a costly and unnecessary mistake to make. Be FICA smart.
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