The Financial Intelligence Centre (FIC) will probably have to impose much more stringent regulations to combat money laundering and terrorist financing than the customer identification, record keeping and reporting of suspicious transactions it currently requires, says its director, Murray Michell.
Controversial new legislation designed to tighten up the enforcement of existing rules is simply a pre-lude to a more thorough review of the way the centre and its enabling legislation work, he told the Mail & Guardian this week, and measures that consumers and banks already chafe at may get much more demanding.
“We need more efficient customer identification, and in some jurisdictions there is customer due-diligence. In other words, not just who your client is, but what transactions has he done in the past? Has the pattern changed? That is a lot more onerous than what we currently have, but that is where we ultimately have to go,” he said.
That review process, which Michell estimates will take another three years, is likely to further irk critics of a Bill proposing amendments to the Financial Intelligence Centre Act (Fica) that is working its way through Parliament.
Key features of the new legislation include an administrative track for enforcement of Fica rules alongside the existing criminal avenue, substantially increased fines for non-compliance, and a new enforcement role for the centre. The FIC will now act as a supervisor for those sectors that are covered by legislation but have no supervisory body, such as the motor industry. More controversially, it also wants the power to step in where it feels existing supervisory bodies, like the Financial Services Board, have not done enough.
Critics, principally in the legal and accounting professions, argue that the changes would turn the centre into an unaccountable super-regulator, and push already high compliance costs.
But Michell insists that the legislation simply plugs gaps in the original Act. “[Banks and other institutions covered by the Act] don’t have to do anything new. What the Bill does do is increase the risk of non-compliance.
“Supervisory bodies such as the Financial Services Board were given responsibility by the original Act to enforce its provisions, but no clear legal mandate. They are now given that mandate,” he said.
“In some cases, like Fidentia, there was deliberate non-compliance so they could move funds around. That is criminal. But 99% of non-compliance is administrative in nature. You don’t want to go to court because an estate agent hasn’t kept their files properly.”
Consultation, appeals processes, and the right of recourse to the courts, he suggests, will ensure that the FIC does not over reach.
“We want to increase the risk for those that are playing at the edges of legality — it is all about identifying the proceeds of crime and asking how [the state] can get its hands on them,” Michell said. He can expect a battle.