The crucial role of the Financial Intelligence Centre, the institutional custodian of FICA, was also evident in the Minister’s recent approach to the North Gauteng High Court, requesting an order clarifying his limitations in interfering with banks on behalf of the politically-exposed Gupta family. Central to the Minister’s application were investigations conducted by the Centre into suspicious financial transactions.
The proposed amendments to FICA would allow the Centre to access, share and query suspicious transactions of politically-exposed persons. The Makwakwa situation provides a textbook example of what the amendments seek to achieve, considering that he holds a position of authority and made suspicious payments.
It is not clear what exactly triggered the investigations in his case. However, one notable aspect of the FICA Amendment Bill is the introduction of whistle-blowers as triggers for investigations, which should instil more confidence in the system.
The Bill is aimed at combatting both private and public sector corruption, money-laundering, and terrorism, among other issues. It also enables South Africa to implement UN sanctions relating to asset freezes, such as the sanctions imposed on Iran’s nuclear programme.
But the proposed amendments to FICA have attracted fierce resistance from some sections of South African society. Why? The answer lies in the powers the Bill accords to the Centre, which indirectly allow it to conduct ‘lifestyle audits’.
For instance, the Bill empowers banks to engage in expansive due diligence reviews of their clients, especially those who hold positions of authority. Banks are required to investigate the sources and beneficiaries of finances deposited into their accounts. The current status quo dictates that the Centre investigates clients solely based on banks’ suspicions. However, the Bill gives the Centre powers to initiate investigations based on its own suspicions.
To actualise this, the Bill lists those who will be subjected to extra due diligence. Diplomats, CEOs, directors of companies and senior public servants including the president, deputy presidents and mayors, are listed as such “high-risk” clients. In addition, juristic persons such as companies will be eligible for closer scrutiny.
The Bill also introduces a concept of beneficial ownership. This gives more powers to the Centre to conduct thorough investigations into the accounts of those persons or entities who could benefit from the proceeds of illicit finance. For instance, in the Makwakwa investigation, the Centre would have had powers to investigate those who might have benefited from the transactions he allegedly made. Such wide-ranging powers would allow a more holistic approach to fighting financial crime and corruption in general.
The Bill seeks to bring South Africa’s financial regulatory regime in line with international best practice. South Africa is a party to agreements within the United Nations which require the country to enact such legislation.
Leading the resistance to the amendments is the so-called Progressive Professionals Forum (PPF), led by Mzwanele Jimmy Manyi, and sections of the ANC including the Youth League. President Jacob Zuma received the Bill from Parliament in May, but has thus far refused to sign it, citing PPF objections based on the potential unconstitutionality of the legislation.
In a paradoxical turn of events, the National Executive Committee of the ANC came out in support of the Bill (albeit indirectly) by calling for the introduction of lifestyle audits. This call has been made before, and its revival amid allegations of state capture and public sector corruption is a welcome development.
Criticism of the Bill from the PPF and ANCYL should be dismissed outright. Such criticism emanates from those who fear that giving more powers to the Centre will prevent their continued engagement in activities that run counter to the Bill and Constitution.
What they could have raised more legitimately is exactly how the FIC will exercise its powers. This fear is not without foundation in a country like South Africa, given our recent history with the Hawks and the National Prosecuting Authority. South Africa has witnessed a disturbing trend towards the use of state institutions to fight the ANC’s factional battles. One can only hope that the Centre will be spared such abuse as its mandate widens.
There is no doubt that the FICA Bill will help combat corruption, money laundering, state capture and terrorism. The Centre’s investigations into SARS’ second-in-command reflects the important role such institutions should play in entrenching our young democracy.
It is therefore incumbent upon President Zuma to sign the FICA Bill into law.