Tag: FICA

At the most basic level, the client due diligence part of FICA compliance requires at least three steps:

• Photo ID
• Proof of Residential Address
• TFS screening

Of the three, Targeted Financial Sanctions (TFS) screening is the most onerous, creating a duty to screen continuously, not only when on boarding a client, but every day while the mandate remains active. TFS screening must be done daily.

Proof of Residential Address requires the client to submit proof of address that, at the time of verification, is  not older than 90 days.  Certain types of documents readily fall into this category: municipal utility bills, tenant statements, or in some cases, written confirmation of occupation, often by a spouse or family member.

Only the photo ID should not lapse.

Once onboarding is complete, the KYC record remains valid for a year.

This is an important distinction to make. At the time of document verification, the submitted documents may not be older than 90 days. However, once accepted, the KYC profile remains valid for one year.

This has the further implication that at some future date, every single KYC profile will lapse and the document verification process must be renewed.

Even a small firm with as few as 600 active matters, with any mandate exceeding 12, months will face a challenge to repeat the document collection and verification process.

Practical steps will require contacting the client for current documents, receipt and consideration of same and update the local KYC document repository. The time and labour demands of such an activity must not be underestimated.

In the event where more stringent KYC requirements apply, such as a formal Risk Assessment, this will also have to be repeated.

 What steps can be taken to ameliorate this problem?

Certain themes repeat when dealing with structural problems such as this. These include systems, training and time management.

Regardless of whether a manual or computer system is in use, KYC profiles should be scheduled on a calendar for the anticipated renewal date. With online systems, early warning notifications may be expected. Once the return date arrives, the relevant documents must be requested immediately. Where template documents or electronic system are in use, these should be updated regularly.

Training keeps staff aware of the obligations under which they work. Training should include ethics and confidentiality, office procedure and escalation as well as practical use of any systems deployed.

Once the renewal cycle commences, it is important to complete the various relevant activities as rapidly as possible, in order to prevent disruption of other activities as far as possible and avoid potential bottlenecks.

Depending on the level of KYC required, the steps to be completed may include

• recent proof of Residential Address
• Risk Matrix assessment
• Request of supporting documents

Note that TFS is not an annual activity.

-BC

The Platteland¹ is known for it’s that won’t happen here attitude. When it comes to FICA compliance and reporting obligations, this is not true. Even the most idyllic small town may the centre of money laundering, terror financing or other illicit forms of financial proliferation.

As reported by IOL a man appeared in the Lichtenburg Magistrates Court on charges of funding a terrorist organization.

It is worth noting that Lichtenburg is located 140km from Johannesburg, with a population of some 26000 souls. It is the heart of an agricultural community, which mainly produces maize.

The highlights include

• A small town
• A South African Citizen
• R11500
• Bitcoin
• A listed terrorist organization

This clearly illustrates that FICA risks exist everywhere, not merely in the big cities.

1. remote country districts ↩︎