FIC implements targeted financial sanctions
An overview of measures to implement UNSC resolutions
On the 1st of April 2019, the sections in the Financial Intelligence Centre Act relating to targeted financial sanctions (TFS) came into effect.
Targeted financial sanctions are measures implemented to restrict certain persons or entities from having access to funds or property under their control and from obtaining financial services in relation to those funds or property. The aim of the targeted financial sanctions is to curb the financing of weapons of mass destruction and terrorist threats to peace. Persons or entities appearing on the list are identified by the United Nations as being involved or connected with terrorist acts and to weapons of mass destruction.
Section 26A-26C of the FIC Act are amongst some of the sections that came into effect that specifically deals with targeted financial solutions.
Section 26A stipulates the requirements of the Director of the FIC to give notice of persons and entities who are subject to targeted financial sanctions in terms of the United Nations Security Council resolutions.
In accordance with Section 26B of the FIC act, it is prohibited to acquire, collect, use, possess or own property of persons or an entity who is identified by the TFS list. This section further prohibits providing financial services and/or products to persons or entities subject to targeted financial sanctions.
Section 26C deals with permitted financial services and dealings with the property of persons or entities identified by the TFS lists.
In light of the aforementioned, what are institutions obligations in relation to the implementation of targeted financial sanctions?
Institutions are not allowed to transact with a person or an entity whose name reflects on the TFS list. An institution is thus required to implement measures that will prevent it from transacting( or continuing with a business relationship) with a person or an entity whose name reflects on the TFS list;
Submit a Terrorist property report to the FIC if the organisation is in possession or control property of a person listed on the TFS list;
Submit a Suspicious transaction or activity report if there are suspicious transactions or activities that may be connected to a person or entity listed on the TFS list;
If a client reflects on the list to freeze assets and not to proceed with any transaction.
Screening or clients against the TFS list
In order for an institution to comply with the obligations, accountable institutions whose products or services are at high risk of being used for terrorist financing or an accountable institution that is more likely to come into contact with persons or entities on the sanctioned list should screen clients and prospective clients against all sanction lists. Screening can be done during the client-take on process, form part of the ongoing due diligence process and when UNSC adopts new TFS measures and adopts the TFS list.
The FIC has created a link on its website, especially for Targeted financial sanctions. It contains a search function for the TFS list and a subscription service that will send an alert to subscribers each time there are changes to the list.
Additional guidance in relation to reporting obligations
The Financial Intelligence Centre recently issued updated guidance notes on institution reporting obligations:
Guidance notes issued by the FIC are authoritative of nature, institutions should thus read the guidance notes in conjunction with the FIC Act and the MLTFC regulations and ensure that the guidance given is implemented in the institutions Risk Management and Compliance Programme.